Bank of Albania · Adequacy Assessment Process (ICAAP) was one of the main highlights of supervision in 2017, regarding the approximation of supervisory practices with Basel principles

1 Bank of Albania

Annual Supervision Report 2017

Bank of Albania

2017A N N U A LSUPERVISION

REPORT

2Bank of Albania

Annual Supervision Report2017

Data from this publication may be used, provided the source is acknowledged.Published by: Bank of AlbaniaSheshi “Skënderbej”, Nr.1, Tirana, AlbaniaTel.: + 355 4 2419301/2/3; + 355 4 2419401/2/3Fax: + 355 4 2419408E-mail: [email protected]

Printed in: 270 copiesPrinted by: ADEL CO

www.bankofalbania.org

3 Bank of Albania


C O N T E N T S

1. THE FUNCTION OF SUPERVISION 7

2. SUPERVISION HIGHLIGHTS IN 2017 82.1 Approximation of supervision practices 82.2 Monitoring and addressing non-performing loans 92.3 Cooperation with international institutions 102.4 Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism process by MONEYVAL 112.5 On-site examinations 12

3. KEY PRIORITIES PLANNED FOR 2018 153.1 Credit risk focused on non-performing loans and the addressing of borrowers with financial difficulties 153.2 Approximation of regulatory framework with Basel III 153.3 Regulation and supervision of bank's governance 163.4 Banking system consolidation 173.5 Self-assessment of the equivalence with European regulatory and supervisory framework 173.6 Collaboration with the European Central Bank 173.7 Preparation of financial reporting according to the international accounting standards 18

4. REGULATORY FRAMEWORK 19

5. LICENSING 265.1 Banks 265.2 Non-bank financial institutions, microcredit financial institutions and electronic money institutions 275.3 Savings and Loan Associations and Unions of Savings and Loan Associations 285.4 Foreign Exchange Bureaus 285.5 Other 28

6. RISKS IN THE BANKING SYSTEM AND NON-BANK FINANCIAL INSTITUTIONS 316.1 Banking system highlights 316.2 Capital ownership structure by country of origin 326.3 Banking system structure 326.3 Management of banking activity risks 356.5 Non-bank financial institutions and savings and loan associations 566.6 Credit Registry 61

ANNEXES 631. Organisational Structure of the Supervision Department 632. Share of banks in the banking system 633. Assets and liabilities 644. Core financial indicators 685. Banks’ shareholders 696. Data on shareholders / partners of non-bank financial institutions 707. Bank branches and agencies in Albania, by prefecture 728. E-banking products approved by the bank of Albania 729. E-banking products/services, by commercial banks, as at end of 2017 7210. List of entitites licensed by the bank of Albania by year 7311. Data on banking services in 2017 7312. Indicators of banking network extension at the end of 2017 7313. Supervision regulations in force, as at 31 December 2017 74

4Bank of Albania


B O X E S

Box 1 Guideline “On the Internal Capital Adequacy Assessment Process” 21Box 2 Regulation “On recovery plans of banks” 24

T A B L E S

2. SUPERVISION HIGHLIGHTS IN 2017 Table 1 Number of examinations by type of institution and risk 14

3. KEY PRIORITIES PLANNED FOR 2018Table 2 Supervision priorities for 2017 - 2018 and foreseen activities 18

5. LICENSINGTable 3 Number of money transfer agents as at end-2017 29

6. RISKS IN THE BANKING SYSTEM AND NON-BANK FINANCIAL INSTITUTIONSTable 4 Banking system total assets and loan portfolio’s share to GDP 33Table 5 Key banking system asset items 33Table 6 Key banking system liability items 34Table 7 Change in off-balance sheet items compared to the previous year 34Table 8 Herfindahl* (H) Index of asset, deposit and loan concentration 35Table 9 Quarterly credit growth in 2017 35Table 10 Lending by sector and purpose of use 36Table 11 Structure of outstanding credit by term to maturity 37Table 12 Structure of outstanding credit by currency 37Table 13 Share of credit outstanding by category 39Table 14 Type of collateral by sector and currency 41Table 15 Integrated evaluations of money laundering and terrorism financing risk 48Table 16 Integrated evaluation of transfers for money laundering and terrorism financing risk 48Table 17 Main profitability indicators 53Table 18 Profitability indicators by main activity 53Table 19 Average profitability ratios 54Table 20 Performance of efficiency indicator 54Table 21 Shareholders’ equity structure and its components’ performance 55Table 22 Activity of non-bank financial institutions 57Table 23 Total assets of NBFIs 57Table 24 NBFIs’ loan portfolio, net and gross, December 2016-December 2017 58Table 25 Gross portfolio by activity, December 2016- December 2017 58Table 26 Financial leasing portfolio, by funded institution, December 2017 59Table 27 Annual factoring volume and balance in December 2017 59Table 28 Indicators of loan portfolio quality for December 2017 59Table 29 Value of annual transfers and payments 2017 60Table 30 Unions and SLAs assets, December 2016-December 2017 61Table 31 Gross and Net Loan portfolio, total for Unions and SLAs, December 2016- December 2017 61Table 32 Entities that report to the Credit Registry 62

5 Bank of Albania


C H A R T S

5. LICENSINGChart 1 Financial and banking sector structure and ownership 26Chart 2 Number of bank branches/agencies in years 28Chart 3 Geographical distribution of resident population and of bank branches/agencies’ network, by prefecture in 2017 29Chart 4 Foreign exchange bureaus, in years 29

6. RISKS IN THE BANKING SYSTEM AND NON-BANK FINANCIAL INSTITUTIONSChart 5 Equity ownership structure by country of origin and performance over time 32Chart 6 Monthly credit growth in 2017 35Chart 7 Credit outstanding to enterprises and households as a percentage of total loans (in %) 36Chart 8 Volume of outstanding credit by currency 37Chart 9 Share of foreign currency loans unhedged against the exchange rate risk in foreign currency credit portfolio 37Chart 10 Lending by branches of economy 38Chart 11 Performance of non-performing loans portfolio and credit portfolio compared to the previous quarter 39Chart 12 Outstanding NPLs in the banking system 39Chart 13 Loan loss provisions 40Chart 14 Net non-performing loans to regulatory capital 40Chart 15 Outstanding credit to enterprises and households 40Chart 16 Outstanding non-performing loans by currency 40Chart 17 Quarterly performance of foreign currency NPLs unhedged against the exchange rate risk to foreign currency credit outstanding unhedged against the exchange rate risk 41Chart 18 Number of complaints handled by the Bank of Albania over the years 52Chart 19 Share of complaints according to type of complainant 52Chart 20 Share of complaints by segment of advertised products 52Chart 21 Share of complaints by typology 52Chart 22 Shareholder’s equity performance 55Chart 23 Capital adequacy ratio and its components 55

6Bank of Albania


7 Bank of Albania


The supervision function at the Bank of Albania is exercised through: consistent improvement of the regulatory framework, in compliance with the European directives and best practices and market specifics; entry into market of sound financial entities by adding value to enhancing competition; implementation of continuous supervision, materialised in on-site inspections and periodic analyses; implementation of effective corrective measures; and, cooperation with international supervisory and regulatory authorities, or other national authorities responsible for supervising financial entities. The constant supervision and regulation of financial activities in Albania, mainly of banking activities, are at the focus of this function and represent its main activities.

Through the supervisory function, the Bank of Albania aims at: ensuring a sound activity of the financial entities; increasing the contribution to strengthening financial stability; and fostering market discipline and fair competition. In recent years, our contribution was also aimed at the recovery and resolution of banks, to prepare a specific regime of crisis management.

1. THE FUNCTION OF SUPERVISION

8Bank of Albania


Year 2017 marked a range of developments related to the supervision function and the financial institutions supervised by the Bank of Albania. The supervisory practice improved the methodology for controlling banks through approximation with Basel principles and efforts to adopt best international practices. These developments are based on the continuous review of the regulatory framework. The self-assessment process of banks on the internal capital requirements is expected to improve the management structure of banks due to an all-inclusive dynamics of management dictated by the process. On the other hand, the quality of bank management will be subject to an improved supervision filter as a result of the revised internal methodology for assessing their corporate governance. Considerable changes have taken place on anti-money laundering, through the revision of the respective regulatory framework and the establishment of internal methodologies for assessing the risk profile of supervised institutions. The increased cooperation with the European Central Bank is expected to support these developments.

In addition, the banking system has improved the credit quality, while the non-performing loans ratio fell by around 5 percentage points over 2017, standing at 13.23%. Liquidity and capital are at adequate levels. Special attention is being paid to the consolidation processes with the expected merger of two banks and the strategic plans on the re-positioning in the market, depending on the dominant short and long-term factors.

2.1 APPROXIMATION OF SUPERVISION PRACTICES

The preparation of the regulatory framework on the Internal Capital Adequacy Assessment Process (ICAAP) was one of the main highlights of supervision in 2017, regarding the approximation of supervisory practices with Basel principles and EU directives. This process is particularly important, as it complements the supervisory perspective with the self-assessment dimension of banks. It contributes qualitatively to establishing an objective risk profile for banks and, consequently, improves the risk-based supervision process. The document that regulates this process is compiled in the framework of a guideline and in compliance with the Basel II Pillar 2, which sets out the criteria for the establishment of an internal process by banks to assess risks that are not covered by the existing regulation on capital adequacy. The guideline identifies the core requirements to assess additional risks and calculate additional capital to cover these risks according to the determined methods and those built by banks, based on the risk profile and their strategy. The Bank of Albania will

2. SUPERVISION HIGHLIGHTS IN 2017

9 Bank of Albania


review the reports of this assessment compiled by banks during 2018. The adequacy of self-assessment of the control environment for risk management and the relevant capital quantitative requirements will be discussed with banks.

In 2017, the project established in collaboration with the European Bank for Reconstruction and Development for the revision of the supervisory methodology in the qualitative assessment of banks’ structures continued. This project focused on analysing and addressing the supervision of corporate governance elements for the established structures, functioning and independence of bank committees, structures and functions of internal control structures on risk assessment. This project is in the final stage of development. The resulting conclusions and recommendations of the project are accompanied by regulatory improvements finalised in 2017, in addition to the proposals for methodological revisions that are under preparation.

The Bank of Albania is preparing the regulatory framework for the approximation of Basel-III supervisory practices for the calculation of liquidity. The regulatory framework in compliance with the EU Directive was drafted last year, and, in parallel, the structure for conducting a prior exercise with banks on the calculation of the LCR (Liquidity Coverage Ratio) was established, aiming at the early identification of problems in its interpretation and the preliminary assessment of banks’ position against this ratio. This process will continue over 2018.

2.2 MONITORING AND ADDRESSING NON-PERFORMING LOANS

Non-performing loans continued the downward trend of the last four years. In 2017, the absolute value of non-performing loans decreased more than a quarter, by 27.5%, lowering the relevant indicator at 13.23%, down by 5 percentage points in annual terms. The value of the remaining loans in the balance sheet is provisioned at higher than 70%. The fall by around ALL 30 billion of non-performing loans in 2017 was driven by their writing off from the balance sheet, at ALL 16.7 billion, solution of large borrowers, the payment of arrears by borrowers and the improvement of borrower classifications. The non-performing loans ratio is still high and further measures are needed to improve the evidenced falling trend, through maintaining the regular existing portfolio and providing an efficient solution of non-performing portfolio.

The fulfilment of the annual objectives of banks related with the performance of non-performing loans and the preparation Recovery and Resolution Plans of large borrowers are specially monitored through the regular reports required from banks in 2017. The submitted information aimed at clarifying the level of the relationships with every borrower, as well as the expectations and plans on future developments. They were subject of discussion with banks across the

10Bank of Albania


system to identify options for sustainable solutions. This reporting will continue in 2018 and beyond, through standardised reports and will serve as a starting point for the regulatory framework for common borrowers.

With assistance from the World Bank and the International Monetary Fund, a regulatory framework is being compiled, aimed at promoting the collaboration and coordination among banks for addressing common borrowers starting at an early stage of problems. This framework provides incentives to bring banks into a common denominator in their decision-making and the coordinated solution of the occurred problems, by providing cooperation agreements among them as well as with the borrowers for the definition of the criteria and modalities of collaboration.

Currently, this regulatory framework is prepared as a draft version and following the discussion with the banking industry, it is expected to be approved in the first part of 2018.

The quality of analysis of credit performance is improved through the detailing of the received data on the shift among classes of credits, the factors that affect the performance of credit and the main currencies of lending. This analyses method was tested and applied in the previous year and will continue on quarterly basis.

2.3 COOPERATION WITH INTERNATIONAL INSTITUTIONS

The cooperation with the European Central Bank (ECB) intensified considerably over 2017. The content of a cooperation agreement between the two institutions has been discussed, which paves the way for a steady collaboration through sharing information on matters of common interest, professional experience and coordinating decision-making, an important step in the integration process of the Albanian institutions in the European Union structures. Meanwhile, the Bank of Albania was invited to participate as an observer in two supervisory colleges organised for Greek banking groups of international presence (including the Albanian presence) and in a targeted inspection in one bank of EU origin. The shared information and the meetings with partner institutions in other countries contributed to the coordination of actions and supervisory measures, and the establishment of a clearer profile for banks, both in Albania and in the relevant group. This collaboration is expected to continue in 2018 and beyond.

Throughout 2017, the Bank of Albania continued the cooperation with the European Banking Authority (EBA) and the central banks in South Eastern Europe in the framework of the Cooperation Forum between supervisory authorities of these countries, regarding the sharing of information on the recent regulatory amendments and the updating of developments in the field of supervision. The delivery of EBA’s training plan for 2018, sharing of supervisory experiences

11 Bank of Albania


among authorities, possibility of participation in trainings organised by EBA, and the exchange of indicators of financial systems development through a common platform enhances the supervision quality and approximates our developments with the European ones.

The Bank of Albania is part of the Vienna Initiative, a broad forum for the exchange of sustainable information on measures to address non-performing loans in the Central, Eastern and South-Eastern Europe region (CESEE). This forum brings together public and private sector stakeholders of EU-based cross-border banks present in emerging Europe, including, the international financial institutions (the International Monetary Fund, the EBRD, European Investment Bank and the World Bank), European institutions (European Commission and the European Central Bank), etc.

In this forum, the Bank of Albania has shared qualitative and quantitative information on the measures undertaken to address the non-performing loans and on their quantitative impact on the financial soundness of the system.

The International Monetary Fund has continuously assisted the Supervision Department through a resident advisor, with expertise in the supervision and financial stability areas. The advisor reviews the regulatory framework and the internal approach for addressing the supervisory issues aiming at their improvement and approximation with the best standards. The Bank of Italy assisted in two projects, during 2017. These projects consist in improving the internal process of risk analysis: the Early Warning System; and defining limits on financial indicators of borrowers to assess the risk analyses performed by banks.

Also, the Bank of Albania is member of Group of Banking Supervisors from Central and Eastern Europe, BSCEE Group. As a member of this group, the Bank of Albania has regular contacts with this institution sharing information about the annual developments in the banking system, and participating in annual conferences or seminars and trainings organised by the BSCEE.

2.4 EVALUATION OF ANTI-MONEY LAUNDERING MEASURES AND THE FINANCING OF TERRORISM PROCESS BY MONEYVAL

In 2017, important amendments were made to the regulation of the Bank of Albania for all institutions subject to its jurisdiction (banks, non-bank financial institutions, savings and loan associations, and foreign exchange bureaus) regarding anti-money laundering and financing of terrorism. The amendments consist in additional requirements for reporting by financial institutions of qualitative and quantitative data, according to a standardised form, on annual basis (including a questionnaire). The amendments, in addition to the problems

12Bank of Albania


identified in the implementation of the applicable legal and regulatory framework, aimed at addressing the implementation of international standards and the recommendations provided in the fourth round of Albania’s evaluation by Moneyval’s experts.

These amendments drove to the need to approve a methodology for off-site evaluation dedicated to the risk on anti-money laundering and combating the financing of terrorism (AML/CFT) accompanied with a matrix of risk evaluation in this field. The off-site evaluation of AML/CFT risk is a crucial tool in supporting the supervisory process in accordance with a risk-based approach. Based on data reports for 2016, the Bank of Albania, for the first time, performed the evaluation of this risk exposure of the institutions, and has currently consolidated the analysis based on the data reported by institutions for 2017. The results of this evaluation shall serve to the supervisory process focusing on institutions and activities that pose high risk in terms of AML/CFT.

In 2017 Q4, the Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL) carried out the fifth round of Albania’s evaluation. The Bank of Albania was an important part of this process as the supervisory authority of the financial system, and was very active in completing the necessary information requested through both template forms and direct meetings. The Moneyval Committee of Experts evaluated positively the above-stated developments. Currently, for the fifth evaluation round for Albania, the evaluation report is being drafted by the experts and the final report with the respective recommendations is expected to be approved by this Committee within 2018 H1.

2.5 ON-SITE EXAMINATIONS

In 2017, fourteen full-scope and partial examinations were performed in banks, non-bank financial institutions and savings and loan associations. In 2017, the number of examinations in non-bank institutions increased, after the expansion of their number and share in the financial system. The main objective of the examinations remains defining a complete risk profile for the licensed institutions, by considering both the qualitative and quantitative factors.

The main fields at the focus of 2017 examinations and the relevant conclusions by type of institution are summarised as follows:

In banks, improvements have been identified regarding the completion of the internal framework, the compliance with the supervisory regulatory framework (in particular the classification and establishment of provisions for the borrowers’ exposure), the recovery of non-performing loans, the compliance with the regulatory indicators (capital and liquidity), etc. At the same time, the improvement of governance systems, the strengthening of the oversight role of

13 Bank of Albania


the management bodies, and the increase of independence, effectiveness and preventive ability of audit systems remain important issues of supervision. In addition to the prudential growth of lending, the efforts to solve and recover the non-performing loans are assessed as well. The assessment of strategic plans of banks, in terms of identifying the targeted expectations in the banking market, the orientation of sources and the adoption of structures with these expectations, have been given special consideration. The prudential addressing of bank activity expansion and the selected forms of investments with their complexity was part of this assessment, as banks seek to maintain their profitability levels.

The relationships with the related parties - taking into account the sensitive shareholder-bank-administrator relationship - will continue to be supervised attentively. Also, the transparency with customers is always an important part of assessment and verifications throughout the on-site examinations.

Regarding the non-bank financial institutions, the governance and audit systems in these institutions still have room to ensure effectiveness, independence and proper authority supported also by the improvement of information systems. These factors are materialised in a higher level of deficiencies regarding the correct reflection of classification and provision funds to the exposures of borrowers, transparency issues with customers, etc. On the other hand, non-bank institutions are rather active, not only in increasing or combining the activities, but also in expanding the use of loan instruments (in addition to their capital) to finance the activity (debt securities, participation in national financing programs/development, borrowing from banks or international institutions, etc.). This trend is considered as a normal developing phase for these institutions, and the increase of stakeholders, investors, that analyse and monitor the activity of non-bank financial institutions are expected to contribute positively to the strengthening of governance systems and their control.

Some of the savings and loan associations were subject to examinations for the first time, after the conclusion of the consolidating process and separation from the Unions. Overall, the separation process has been carefully managed by the governing bodies of the associations, maintaining the positive pace of both the activity and financial results. On the other hand, they need to improve their internal framework, the completion of operational units, the increase of professional capacities of management bodies, the clear separation of duties and responsibilities, etc. The response to the examination recommendations was positive, and within the established deadline.

At the conclusion of the examinations, recommendations on the necessary improvements were provided, and their implementation was monitored closely. Also, supervisory measures are applied on some institutions, for which recurring breaches of the regulatory requirements had been identified.

14Bank of Albania


Table 1. Number of examinations by type of institution and risk

Examined licensed entities

Risks

Total assets (in ALL million)

Share to entities group

Share to financial system

Stra

tegi

c

Org

anisa

tiona

l

Cre

dit

Liqui

dity

IRRB

B*

Mar

ket

ICT

Ope

ratio

nal

Repu

tatio

nal

Prof

itabi

lity

Cap

ital

Banks 4 5 7 5 4 4 4 4 5 4 5 1,029,328.80 71.22% 69.00%Non-banks 2 4 3 2 3 2 4 1 3 3 3 11,190.20 29.33% 0.75%SLAs 3 3 3 3 3 3 3 3 3 3 3 5,845.04 71.28% 0.39%TOTAL 9 12 13 10 10 9 11 8 11 10 11 1,046,364.04 70.15% 70.15%*Interest rate risk in the banking books Source: Bank of Albania.

15 Bank of Albania


The priorities of Supervision Department for 2018 will focus on the assessment of main risks management to which the supervised entities are exposed; realisation of non-exhaustive supervisory actions; the continuous monitoring of the overall performance and individual risk profile for each of the supervised institutions. These priorities are further detailed in the following sections.

3.1 CREDIT RISK FOCUSED ON NON-PERFORMING LOANS AND THE ADDRESSING OF BORROWERS IN FINANCIAL DIFFICULTIES

The reduction of non-performing loans ratio will continue to be on the focus of supervision in 2018. Notwithstanding the considerable fall in non-performing loans during 2017, the current level is still considered high affecting the long-term stability of banks and banking system. Maintaining a prudential approach on early addressing problems and the commitment of the Bank of Albania in the framework of the national program on addressing non-performing loans, has continued through the undertaking of an initiative for the regulation of cooperation among banks, for addressing common borrowers that are in financial difficulties to repay their liabilities. This initiative will be realised during 2018, through the compilation of a special regulatory framework on the possibility of resolving out-of-court the non-performing borrowers that are exposed to more than one bank. It will serve as a mechanism to bring banks into a common denominator to find a long-term stable solution for these borrowers. This initiative is based on the similar international experiences and is drafted in collaboration with FinSAC project of the World Bank and the IMF resident advisor at the Bank of Albania.

3.2 APPROXIMATION OF REGULATORY FRAMEWORK WITH BASEL III

The global financial crisis highlighted the need to review the banking regulatory framework regarding the management of unfavourable situations. These changes were performed through Basel III. One of the important introduced elements is the establishment of the criteria on the quantitative management of banks liquidity through a new indicator named Liquidity Coverage Ratio (LCR). This indicator aims at the early preparing of banks to satisfy the needs for liquidity that may arise from unexpected events causing massive bank runs.

3. KEY PRIORITIES PLANNED FOR 2018

16Bank of Albania


The Bank of Albania has planned the adoption of this regulatory framework and is carrying out all the needed preparations to draft it. This process, among others, considers also the preparation of banks on the new reporting elements of this framework and the adoption of their internal processes for the management of liquidity risk.

The revision of supervisory regulatory framework will aim at including Basel III elements, over 2018, related with the improvement of capital quality, after assessing the possibilities to adopt and establish adequate reserves of capital, to enhance the sustainability of banks in Albania.

3.3 REGULATION AND SUPERVISION OF BANK'S GOVERNANCE

Supervision has paid special attention to good governance in banks, as an important element for risk and management. Hence, the review of the internal regulations and manuals to assess banks is considered as necessary. The purpose of amendments is to approximate the supervisory requirements and methods with those of the European Union and to improve the internal criteria of assessment. Part of amendments have been released over 2017, while within 2018, other methodological changes will take place in collaboration with the European Bank for Reconstruction and Development (EBRD). This project consists in the structure and orientation for adequate assessment of banks’ structures regarding the decision making, audit environment and the management process of important risks of banks.

The approval of the Guideline to the Internal Capital Adequacy Assessment Process (ICAAP) of banks, at the beginning of 2017, by considering a preparatory period for banks, has aimed at ensuring the realisation of an effective and comprehensive internal process of banks for the capital adequacy assessment. The process lays down the documentation and presentation, for the first time by banks till the end of April 2018, of capital adequacy self-assessment report. This report and the entire ICAAP will be subject of supervision assessment and review for the identification of possible deficiencies by supervisors and results will be informed to banks to make the necessary improvements in the next reporting. To conduct this assessment the internal guiding documents are reviewed and will be finalised to help in assessing each of ICAAP documents by all banks and the configuration of Internal Supervisory Review and Assessment Process. This process will take place throughout 2018. There will be continuous communication with banks, throughout this period, to discuss on the content and assessment conducted in the framework of this report.

17 Bank of Albania


3.4 BANKING SYSTEM CONSOLIDATION

The consolidating trends of the banking system identified in the previous years, materialised in 2017, with the decision on the merger of Intesa SanPaolo Bank with Veneto Bank, mainly driven by the international developments and by the decision of the Bank of Italy and the European Central Bank in coordination with Intesa SanPaolo group in Italy, following the announcement on the bankruptcy of Vento Banking group. The merger by absorption of Veneto Bank is expected to end in 2018, while the Albanian banking system will have less banks as a result. The Bank of Albania deems that there is still scope for further consolidation, expected to be materialised and is carefully monitoring all developments in this regard. This assessment is based on the interest stated by some banks to expand and the shrinkage of some other banks due to the revision of plans for the presence in the Balkans by the parent banks.

3.5 SELF-ASSESSMENT OF THE EQUIVALENCE WITH EUROPEAN REGULATORY AND SUPERVISORY FRAMEWORK

In the framework of aligning the legislation and regulatory framework with the EU directives and the relevant standards, to assess the current situation and determine on future intervention, in 2017, work started on the self-assessment of the equivalence of the supervisory regulatory framework with European regulatory and supervisory framework (CRD and CRR)1”, according to the filled in questions in the Questionnaire of the European Banking Authority (EBA)2. This process shall precede the identification of Supervision Department needs for drafting new regulatory acts and supervisory methodologies or the review of the existing ones, aiming at ensuring continuous alignment with Acquis Communautaire on the activity of credit institutions.

3.6 COLLABORATION WITH THE EUROPEAN CENTRAL BANK

With the creation of a Single Supervisory Mechanism (SSM) at the European Central Bank in November 2014 and considering the active presence in Albania of subsidiaries of large European banking groups, the Bank of Albania and the European Central Bank are in the process of drafting a comprehensive agreement that will regulate all the fields and aspects of this cooperation. The signing of the agreement by both institutions, within 2018, will finalise this collaboration.

During 2018, the Supervision Department aims to take part in some of the Supervisory Colleges for European banking groups present in Albania, as an

1 Capital Requirement Directive and Regulation.2 EBA (European Banking Authority)

18Bank of Albania


observer, through a specific agreement for this purpose. This is considered an important step not only in the framework of strengthening cooperation with EU supervision authorities and the alignment with the most advanced supervision practices, but also in the framework of a more comprehensive supervision assessment of EU-based banks that operate in Albania.

3.7 PREPARATION OF FINANCIAL REPORTING ACCORDING TO THE INTERNATIONAL ACCOUNTING STANDARDS

To adopt and apply the International Accounting Standards (IAS), the Bank of Albania is carrying out some theoretical and practical preparations. In addition, theoretical preparations through trainings, the possible effects arising from the application of standards in the financial statements and capital of banks are being assessed, with the assistance of the World Bank and Grant Thornton, an international auditor. During 2018, the Bank of Albania will carefully monitor the results from the application for the first time of the new standard - IFRS 9, at banks and, depending on the results, will determine a supervisory position with a prudential approach to ensure an adequate protection for banks.

Table 2 Supervision priorities for 2017 - 2018 and foreseen activities

Priorities 2017 Priorities 2018 Planned activities Extension for a further period

Credit risk/ NPLs performance Credit risk/ NPLs performance

Consolidation of banking system

Collaboration with ECB Collaboration with domestic and foreign authorities

Risk-based supervision

Implementation of International AccountingStandards

Capitalisation of business startegy

- Assessment of banks’ strategies and objectives for NPLs- Assessment of Recovery and Resolution Plans for large borrowers- Platformë to address common borrowers of banks

- Liquidity risk - BASEL III- Capital reserves - Basel III- SREP (Supervisory Review and Evaluation Process ) - BASEL II - Recovery and resolution in banks

- Assessment of approximation of the regulatory framework with those of EBA

- Revision of assessment process of banks’ corporate governanace- Methodological developments

- Sta� training

- Signature of collaboration agreement with ECB- Participation in Supervisory College of European banks- Collaboration with FSA for joint inspections,revision of Collaboration Agreement,information sharing

- Assessment of banks’ IAPCA - Assessment of Recovery Plans- Determination of assessing criteria on lending

- Preparation of reporting framework oninternational accounting standards- Monitoring of IFRS 9

- Assessment of IAPCA documents and their consultation with banks

- Monitoring the merger processes of banks and possible purchases

Approximation of regulatorysupervisory framework withEuropean standards

Supervision of banks’ governance

Approximation of regulatorysupervisory framework withEuropean standards

Regulation and supervision of banks’ governance

19 Bank of Albania


The methodological and regulatory supervisory framework is subject of review and continuous process of completion, aimed at implementing the applicable legal requirements and alignment with the directives of the European Union, a comprehensive implementation of Basel Principles, and the addressing of problems and suggestions of supervised entities, obtained through an on-going communication with them.

Banks and other financial institutions, subject to supervision by the Bank of Albania, have played an active role in the drafting and reviewing process of the bylaws. They have contributed with ideas and opinions about the regulatory amendments.

The Guideline “On the Internal Capital Adequacy Assessment Process (ICAAP)3 is a qualitative step forward in completing the supervisory process and improving the internal risk assessment and management processes at banks, and the start of the work to draft supervisory procedures related with the Supervisory Review and Evaluation Process (SREP)4. Also, various new regulatory acts were finalized. They are very important for banking supervision and the institutions entities subject to these acts. Furthermore, existing regulations were amended as follows:

• Comprehensive review of the Regulation “On consolidatedsupervision”(approvedbyDecisionNo.4,dated1.2.2017oftheSupervisoryCounciloftheBankofAlbania).

This Regulation lays down the conditions, rules and regulatory requirements for conducting consolidated supervision, for the purposes of risk management deriving from a banking group and a financial group. The complete review of this Regulation was accomplished in compliance with the requirements and principles on consolidated supervision laid down in the directives and the regulations of the European Union (EU), and the standards of the Basel Committee. The reviewed Regulation sets out the rules for the supervisory authority, mainly on qualitative and quantitative supervision, the methodology to calculate regulatory capital and capital requirements for the main risks to banking and/or financial groups: credit risk; market and operational risk, including the important effect (material) that the dependant entities/institution might have. The regulation deals also with some qualitative supervisory requirements that address certain problems in the banking system in the framework of risks that

3 ICAAP – Internal Capital Adequacy Assessment Process.4 SREP- Supervisory Review and Evaluation Process.

4. REGULATORY FRAMEWORK

20Bank of Albania


may derive from important transactions within the group, which are determined also in the European Union Regulation5 and the document of Basel Committee6.

• Amendments to the Regulation “On capital adequacy ratio"(approvedbyDecisionNo.5,dated1.2.2017oftheSupervisoryCounciloftheBankofAlbania).

The purpose of these amendments is to re-introduce the measure that penalises (in terms of capital requirement) the placements of the banking sector with non-residents, while a part of measures have ended at the end of 2016. The change of the measure was considered to combine the need to maintain a higher capital requirement for banks that are active in placements with non-residents, and the need to place a limit on the measure to increase the capital requirement.

• AmendmentstotheRegulation“OnPreventionofMoneyLaunderingand Terrorism Financing" (approved by DecisionNo. 22, dated5.4.2017oftheSupervisoryCounciloftheBankofAlbania).

The purpose of these regulatory amendments was to fulfil the recommendations of the Moneyval Committee of Experts, provided in the last evaluation for Albania, and to resolve some issues concluded in the on-site supervision of the institutions that are subject to this Regulation.

The amendments set out the requirements for the institutions, subject to the regulation, to compile and have in place internal rules and procedures regarding the implementation of the requirements against terrorism financing and the integrity of employees involved in the process of the prevention of money laundering and terrorism financing. Also, the amendments determine the obligation of institutions to inform the Bank of Albania, on the transactions related with persons declared as financiers of terrorism, and some additional requirements on reporting quantitative and qualitative data on money laundering and terrorism financing, according to a standardised form on annual basis.

• Amendments to theRegulation“On transparencyofbankingandfinancial products and services” (approved byDecisionNo. 25,dated3.5.2017oftheSupervisoryCounciloftheBankofAlbania).

The Regulation was amended with a view to completing and improving the regulatory framework of the supervisory authority on transparency of banking and financial products and services provided by the institutions subject to this Regulation, and the particular addressing of some problems at banks, regarding

5 “Regulation (EU) 2015/2303 of 28 July 2015 supplementing Directive 2002/87/EC of the European Parliament and of the Council with regard to regulatory technical standards specifying the definitions and coordinating the supplementary supervision of risk concentration and intra-group transactions”.

6 “Intra-Group Transactions and Exposures Principles”.

21 Bank of Albania


transparency with clients, by considering also the relevant recommendations of the Competition Authority. These amendments also aim at further aligning it with the European Directive on consumer protection, in the framework of continuous increase of requirements for the consumer protection.

The increase of transparency by the institutions subject to this Regulation improves the effectiveness of market discipline and the supervision by the Bank of Albania.

• ApprovalofthenewGuideline“OntheInternalCapitalAdequacyAssessmentProcess(ICAAP)”,(approvedbyDecisionNo26,dated3.5.2017oftheSupervisoryCounciloftheBankofAlbania).

The guideline sets out the requirements for the compilation and implementation of this process by banks, and the supervisory expectations, regarding the structure and content of the report that banks will submit to the Bank of Albania, on annual basis. This process is considered of particular importance to the bank and is realised by the bank independently, as it aims at assessing the adequacy of current and future capital levels, by considering also the bank’s risk profile and strategy (the following Box shows more detailed information on this guideline).

BOX 1. GUIDELINE “ON THE INTERNAL CAPITAL ADEQUACY ASSESSMENT PROCESS”

The Supervisory Council of the Bank of Albania approved the Guideline “On the Internal Capital Adequacy Assessment Process (ICAAP)”, with the Decision No 26, dated 3.5.2017.

ICAAP is a process fully based on the internal processes and systems of the banks that helps to manage and effectively control the risk profile and consequently determines the necessary capital level. This process is oriented toward the quantitative elements of the risk management process - the assessment of internal capital requirements and risk hedging capital, as well as its qualitative elements, created to strengthen the internal rules of management and control of the bank, which allow for an effective management and mitigation of this risk.

Banks, for the realisation of this process, will follow two steps: first, they will determine the level of a specific risk they can undertake, in order to define their risk-bearing capacity and ensure adequate capital to cover this risk; and second, they will make a critical analysis of the risk level that is rational to undertake, taking into account all the possibilities and threats that correspond to this risk.

Banks, in drafting ICAAP, will consider, at least the implementation of the following basic principles:

a) Responsibility. The bank shall be responsible for the implementation and development of ICAAP.

b) Proportionality. Banks will implement ICAAP, regardless of their size and complexity. Each bank shall use appropriate tools and processes in its ICAAP, while it shall prove/argument for the Bank of Albania that ICAAP is complete and appropriate for the risks arising from the activity and the environment in which this activity is conducted.

22Bank of Albania


c) Materiality of risks. ICAAP must be focused on risks that may have a material impact on the current or future capital adequacy situation of the bank.

d) Forward-looking. ICAAP shall focus on ensuring the bank’s capital adequacy, taking into account future developments and its activity’s performance.

The bank, in calculating its capital requirements, shall consider all the important risks and the other internal and external factors that define its risk profile.

a) Risks that are subject of the minimal capital requirement. The bank, in calculating the internal capital requirement on credit risk, market risk and operational risk, shall use the methods defined in the Regulation of the Bank of Albania “On capital adequacy ratio”.

b) Risks that are not entirely covered by the minimal capital requirement. The bank, in calculating the internal capital requirements, shall also consider risks that are not entirely covered by the minimal capital, calculated according the standard methods defined by the Bank of Albania (standard methods for credit risk, market risk or the simple indicator method and the operational risk standard one), which overall do not consider some particular factors in capital calculation to fully hedge a certain risk.

c) Risks that are not subject of minimum capital requirement. The bank, in calculating the internal capital requirement, in addition to the risks that are subject of minimal capital requirement, shall also consider the calculation of the internal needs for capital for the interest rate risk in the banking books, concentration risk, reputational risk, profitability risk, strategic risk, etc. The bank, depending on the complexity and particularity of its activity, may consider also other risks of this category and use its internal qualitative and quantitative methods for their assessment.

d) External environment factors. The bank, in calculating the internal capital requirement, shall also consider the risks that may materialise in extreme, but not impossible, situations with a considerable impact on bank’s capital adequacy. These risks may derive from the macroeconomic environment or market factors, or from the regulatory framework, for the assessments of which the bank shall use

stress-testing.

Bank of Albania, based on the internal capital adequacy assessment process carried out by the bank, will establish the Supervisory Review and Evaluation Process with the purpose to establish an overall opinion on the risk profile of the bank and of its needs for capital.

• AmendmentstotheRegulation“Onestablishingthelevelofdecision-making in the supervision of banking and financial activities”(approvedbyDecisionNo29,dated7.6.2017oftheSupervisoryCounciloftheBankofAlbania).

The amendments aimed at completing the regulatory framework of the Bank of Albania, regarding the decision-making process and its delegation, set out in the appendices, integral part of this Regulation. The amendments provide compliance with the processes and decision making set out in other supervisory acts, in particular: a) the processes laid down in the new law and new supervisory regulations on savings and loan associations and their unions, and b) reflection of some repeals in the law regarding conservatorship on

23 Bank of Albania


banks and consequently the approval of the new law “On the recovery and resolution of banks in the Republic of Albania”.

• AmendmentsintheRegulation"Onriskmanagementintheactivityof non-bank financial institutions" and some amendments inthe Regulation “On the granting of license to non-bank financialinstitutions” (approvedwith the DecisionNo. 46 and 47, dated6.9.2017,respectively,of theSupervisoryCouncilof theBankofAlbania).

The simultaneous and interconnected reviewing of these two regulations aimed, first, at addressing some problems identified during the examination in non-bank financial institutions, and second, to provide some facilities for these institutions in carrying out their financial activity. An important amendment in the Regulation “On risk management in the activity of non-bank financial institutions”, regards the stipulation in case of breaches and the supervisory measures and escalated sanctions on these entities, previously referred to in the law “On banks in the Republic of Albania and the Regulation “On licensing and activity of non-bank financial institutions”, for the cases of licence suspension/revocation.

• Thecomprehensivereviewoftheguideline“Onrecoveryplansofbanks”(approvedwiththeDecisionsNo.72,dated6.12.2017oftheSupervisoryCounciloftheBankofAlbania).

The comprehensive review of the existing guideline “On the recovery plans”, by replacing it with a new Regulation “On the recovery plans of banks” completes the regulatory framework on recovery plans, in compliance with the requirements set out in the new Law 133/2016 “On the recovery and resolution of banks in the Republic of Albania”. The Regulation sets out supervisory requirements on the recovery plans of banks and banking groups, mainly regarding: the content, the way and term of presenting and updating the recovery plans and the simplified recovery plans, the minimum framework of qualitative and quantitative indicators, which are included in the recovery plans, the scenarios banks may include in these plans, as well as the minimum criteria that Bank of Albania takes into account for assessing the recovery plans of banks (The following box provides a detailed information on this Regulation).

24Bank of Albania


BOX 2. REGULATION “ON RECOVERY PLANS OF BANKS”

In compliance with Law No 133/2016 “On the recovery and resolution of banks in the Republic of Albania’’*, the Bank of Albania adopted the Regulation “On recovery plans of banks”, by Decision No.72, dated 6.12.2017 of the Supervisory Council.

Recovery plans are an important part of risk management of banks, and of the assessment process of risk -based supervision from the Bank of Albania.

A qualitative recovery plan shall at minimum include information on the following issues: a) A summary of all elements of the recovery plan. b) Bank’s governance. To ensure the plan is effectively compiled and in due time, the

plan is crucial to be drafted on sound governance basis. c) Recovery indicators. The bank shall compile the framework of recovery qualitative

and quantitative indicators, as an important part of recovery plan, which includes indicators of capital, liquidity, profitability, assets’ quality, as well as market and macroeconomic indicators.

d) Strategic analysis of recovery plan. Through the strategic analysis, the bank identifies the main activities (core business lines) and its critical functions, and determines the main steps to include them in the recovery scenarios.

e) Recovery measures. Through the strategic analysis the bank identifies and assesses the recovery measures and the possible effects of their implementation.

f) Scenarios. The bank, as part of the recovery plan, shall draft, at least, three scenarios: i. a systemic event, ii. a specific event, and iii. a combination of the two.

g) Plan of communicating and informing the group of interest. The internal communication of recovery plan to the bank’s employees and the external communication with all groups of interest is a crucial aspect of its effective implementation and avoidance of negative impacts on the financial system.

h) An analysis of preparatory measures. The recovery plan may need organisational changes to facilitate the updating of the plan and its implementation in the future, to monitor the indicators, or because the process has identified some difficulties to implement the recovery measures. These preparatory actions to be undertaken by the bank or group should be included and described in the recovery plan, to assess if their implementation is possible and to facilitate the monitoring of their

implementation by the bank and the supervisory authority.

The assessment of recovery plans by the Bank of Albania aims at ensuring the necessary information to the resolution structures, with the purpose the compilation of resolution plans, by considering the adequacy of capital and structure of bank’s funds as a ratio to the complexity its organisational structure and risk profile.

* This Law is partially aligned with the EU Directive 2014/59 (Banking Recovery and Resolution Directive).

25 Bank of Albania


• AmendmentstotheRegulation“Oncoremanagementprinciplesofbanksandbranchesofforeignbanksandthecriteriaforapprovingtheir administrators", approvedwith theDecisionNo. 73, dated6.12.2017oftheSupervisoryCounciloftheBankofAlbania.

The reviewed Regulation aims the alignment with the recent requirements of the European Union regulatory acts on good governance and the compliance with the European Bank for Reconstruction and Development recommendations provided in the project on the assessment of the relevant legal and regulatory frameworks and supervisory practices of the Bank of Albania in place.

The amendments mainly consist in: definition of concepts: “risk appetite/tolerance” and “risk capacity”; and the requirements for the publication of special statement on the bank’s risk appetite/tolerance; requirements to draft a special policy for appointing members of the bank’s steering council; additional requirements for the risk management structure/unit and compliance unit; requirements for additional requirements on the credit status of the administrator proposed for approval; requirements to the bank to realise an analysis/assessment on the adequacy of professional knowledge of the administrator that is proposed to be approved; and requirements that banks conduct a regular re-assessment process of the administrators whenever deemed necessary, depending on the circumstances, during the discharge of their functions at the bank; etc.

• AmendmentstotheRegulation“Oninternalauditsystem"(approvedwithDecisionNo.74,dated6.12.2017oftheSupervisoryCounciloftheBankofAlbania).

The regulatory amendments aimed at the approximation with best practices on internal audit and alignment with the amendments in the Regulation “On the core management principles in banks and branches of foreign banks and the criteria for the approval of their managers”. In particular, the amendments set out the requirement to banks that the Head of Audit Committee be at the same time member of the Steering Council of the Bank, aiming at aligning it with the best practices that ensure the inclusion of the Audit Committee in the decision-taking process of the Steering Council and the limitation of risk for the expertise of the audit committee to remain only within the Committee.

• Otherlegalacts

The Supervision Department contributed also to the working group to compile the draft-law “On payment services”, in the framework of the Bank of Albania’s engagement to align the legal framework with the European Directive on Payment Services (PSD2)7.

7 Payment Services Directive.

26Bank of Albania


As at end-2017, the structure of the banking and financial system in Albania consisted in 16 banks, 31 non-bank financial institutions (NBFIs), 426 foreign exchange bureaus, 13 savings and loan associations and 1 union of savings and loan associations.

Pursuant to the Law “On banks in the Republic of Albania”, the Bank of Albania is vested with the power to licence and supervise banks, non-bank financial institutions, savings and loans associations and their unions, foreign exchange bureaus and representative offices.

5.1BANKS

During 2017, within the scope of the licensing function, the Bank of Albania has taken some decisions on:

a) preliminary approval of the transfer of 100% ownership of the shares of Veneto Banka sh.a., and the transfer of the qualifying (indirect) holding in the shareholder capital of Banka Credins sh.a.;

b) preliminary approval for the opening of the subsidiary of the Banka

5. LICENSING

BANKING AND FINANCIAL SYSTEM

Chart 1 Financial and banking sector structure and ownership

Source: Bank of Albania.

BANKS (16) NON-BANK FINANCIALINSTITUTIONS (31)

SAVING AND LOANASSOCIATIONS

(1 UNION AND13 ASSOCIATIONS)

FOREIGN EXCHANGEBUREAUS (426)

Foreign privatecapital (13)

Domestic private capital (18)

State domesticcapital (2)

Foreign privatecapital (7)

Foreign and domesticprivate capital (4)

Domestic private capital (1 union and 13 associations)

Domestic private capital (425)

Foreign and domesticprivate capital (3)

Foreign private capital(1)

27 Bank of Albania


Kombëtare Tregtare sh.a. in the Republic of Kosovo, through the transformation of its branch there into a subsidiary;

c) preliminary approval for conducting additional financial activity of intermediation in insurances by Banka Credins sh.a., Banka Intesa Sanpaolo Albania sh.a. and Veneto Banka sh.a.;

d) approval of 36 administrators of banks, of which 16 members of steering councils, 6 members ofaudit committees, and 14 executives.

e) approval of the expansion of the banking network with two new branches, within the territory of the Republic of Albania;

f) preliminary approval for the issuance of subordinated debt by Banka Credins sh.a. and the settlement of the subordinated debt by the Banka NBG Albania sh.a.;

g) approval of the amendments of the statute of Banka Intesa Sanpaolo Albania sh.a., Banka Kombëtare Tregtare sh.a., Banka Procredit sh.a., Banka Amerikane e Investimeve sh.a. and Veneto Banka sh.a.;

h) approval for the additional M-Banking Zing service by the Banka Ndërkombëtare Tregtare sh.a.

5.2 NON-BANK FINANCIAL INSTITUTIONS, MICROCREDIT FINANCIAL INSTITUTIONS AND ELECTRONIC MONEY INSTITUTIONS

During 2017, the Bank of Albania decided on:

a) licencing three non-bank financial institutions, to conduct the financial activity of payments services and money transfer (Raea Financial Services sh.p.k.), financial leasing (Mogo Albania sh.a.), and microcredit financial institution (Kredo Financë sh.p.k.), respectively;

b) preliminary approval for the transfer of the quota of the capital shares of the non-bank financial institutions Omnifactor sh.p.k., Albanian Financial Institution sh.p.k. and NOA sh.a.;

c) preliminary approval for conducting the insurance intermediation activity by the non-bank financial institution Porsche Leasing sh.p.k. and payments services and money transfer by the electronic money institution Vodafone M-Pesa sh.p.k.;

d) preliminary approval of the administrator of the non-bank financial institution Omnifactor sh.p.k. and of the microcredit financial institution IuteCredit Albania sh.a.

e) suspension of the licence of the microcredit financial institution Capital Invest sh.a. and the electronic money institution Vodafone M-Pesa sh.p.k. The microcredit financial institution Capital Invest sh.a. licence returned active after the termination of the suspension.

28Bank of Albania


5.3 SAVINGS AND LOAN ASSOCIATIONS AND UNIONS OF SAVINGS AND LOAN ASSOCIATIONS

Within the scope of the licensing function the Bank of Albania’s decision-making on savings and loan associations and unions of savings and loan associations during 2017 consists on:

a) the approval of the managers of micro-credit institutions, in accordance with the Law “On savings and loan associations and their unions” and of the Regulation “On licensing and activity of Savings And Loan Associations and their Unions”. The approval was granted for 5 chairs of Steering Councils of savings and loan associations, 6 heads of Audit Committees of the savings and loan association, and 5 administrators of savings and loan associations;

b) based on the legal and regulatory framework, in 2017, the transformation was finalised for the Union of SLAs “Jehona” into the Savings and Loan Association UniFin and the the licence was revoked for the SLA NewCred as result of this process.

5.4 FOREIGN EXCHANGE BUREAUS

Within the scope of the licensing function the Bank of Albania’s decision-making on foreign exchange bureaus consists in:

a) licensing 39 new foreign exchange bureaus.b) revoking the license of 41 foreign exchange bureaus due to the

discontinuation of the activity.

5.5 OTHER

As at end 2017, banks operate through 473 branches/agencies, across the country, while only one bank continues to have a branch outside the territory of the Republic of Albania. This branch is subject of the transformation process n into a subsidiary after the approval by the supervising authority of the host country8. The expansion of the banking services range electronically is a process that increases efficiency by offering banking and financial services in real time and 24/7, which has had an impact in the decrease of the number of branches and maintaining an optimal number of them.

8 Central Bank of the Republic of Kosovo

Chart 2 Number of bank branches/agencies, over years


524529 534 534 529

499 500493

472

440

460

480

500

520

540

2009

2010

2011

2012

2013

2014

2015

2016

2017

29 Bank of Albania


The geographical distribution of bank branches/agencies include almost the entire territory of Albania, while a great concentration of branches and agencies is evidenced in Tirana (42%), where the population concentration is greater as well (31%). Likewise, the distribution of bank branches/agencies by prefectures is also in proportion with the population.

At the end-2017, 426 of foreign exchange bureaus conduct the activity in the foreign exchange market. During the year, 39 new foreign exchange bureau licences were granted, and 41 existing ones were revoked.

In compliance with the requirements laid down in the legal framework in force, the non-bank financial institutions and electronic money institutions may conduct the activity of payment and money transfer services and/or funds allocation and repayment, in case of e-money institutions even through agents. As at end-2017, the number of these entities’ agents was 714.

Table 3 Number of money transfer agents as at end-2017

AK-INVEST** FINANCIAL UNION TIRANA

VODAFONE M-PESA* EASYPAY Total

Agents conducting the activity of money transfer on behalf of the non-bank financial institution 176 273 449

Agents of electronic money institution - 265 265Total 176 273 - 265 714

Source: Bank of Albania.* The licence of Vodafone M-Pesa was s suspended as at end-2017.** The number of AK-Invest agents has been reassessed, compared with the previous year,

including only the number of those that have a contract as agents.

Chart 3 Geographical distribution of resident population and of bank branchecs/agencies’

network, by region in 2017 (in %)

Source: Bank of Albania and INSTAT.

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

Berat

Dibra

Durrës

Elbasan

Fier

Gjirokastra

Korça

Kukës

Lezha

Shkodra

Tirana

Vlora

Population Bank branches/agencies

Chart 4 Foreign exchange bureaus, over the years


1938

58 58 54 58 60

112

189

221

284301

322333356

397428426

-20

0

20

40

60

80

100

0

100

200

300

400

500

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

No. of FXB (left axis)Change by year (right axis)

30Bank of Albania


In the category of Savings and Loan Associations, no new licenses were granted in 2017, while the reorganisation of Savings and Loan Associations was completed, through the transformation of the union of SLAs into Savings and Loan Associations. As at end 2017, there were 13 Savings and Loan Associations and 1 Union of Savings and Loan Associations.

During 2017, structural changes in the ownership of banks and non-bank financial institutions consisted mainly in changes in the non-qualifying holding in the shares/quota of their capital. Meanwhile these entities have notified an increase of their paid-in capital.

31 Bank of Albania


6.1 BANKING SYSTEM HIGHLIGHTS

The most important development of 2017 in the banking activity is the drop of the non-performing loans ratio at 13.23%, with an annual decline of around 5 percentage points. This decline constitutes a consistent development towards the improvement of the quality of the loans portfolio of the system over, at least, the last three years. While lending activity has a moderated growth, the highest impact in the improvement of the indicator of the loans quality comes from the decrease of the value of non-performing loans by around 27.5 %. This decrease was largely affected by the writing off of loans as well as by the solutions given to some large groups of borrowers during the year by the banks.

The stability of the banking system remains high under the circumstances when the Capital Adequacy Ratio increased at 16.6% and the level of profitability of the system remains relatively satisfactory when RoA and RoE are at 0.89% and 10.53%, respectively. Likewise, the banking system has a high level of liquidity with an indicator of 40% against the regulatory minimum of 20%.

Following are the main banking system highlights during 2017:1. Credit outstanding in the banking system grew by around 0.15%,

against the increase by around 2.5% in the previous year;2. Gross non-performing loans decreased by 5.04 percentage points,

standing at 13.23% in December 2017, from 18.17% at the end of 2016; The value of non-performing loans decreased by ALL 30.17 billion during 2017, where an important impact came from the writing off of loans by ALL 16.67 billion;

3. Provisioning level of non-performing loans remains high and increased by 1.2 p.p. compared with the previous year, reaching 71.7%;

4. Banking system’s liquidity situation remains satisfactory. The liquidity indicator stood at 40.79% at the end of 2017, almost at the same level of end-2016.

5. Deposits in the system grew by around ALL 8.5 billion in 2017, compared to the growth of around ALL 59 billion in 2016.

6. The Capital Adequacy Ratio shows an annual growth of around 0.9 p.p. reaching 16.6% against the regulatory minimum of 12%.

7. Banking system’s profit was positive in 2017, at ALL 22.07 billion, or ALL 12.79 billion higher than in 2016. RoA and RoE were positive, standing at 0.69% and 7.15%, respectively, deteriorating from the previous year.

6. RISKS IN THE BANKING SYSTEM AND NON-BANK FINANCIAL INSTITUTIONS

32Bank of Albania


6.2 CAPITAL OWNERSHIP STRUCTURE BY COUNTRY OF ORIGIN

The shareholder capital of the banking system reached ALL 146.95 billion, up by around ALL 10 billion, or 7.36% against the previous year. Foreign capital continues to dominate the capital structure. At the end of 2017, it accounted for around 88.38% of paid-in capital in the banking system, slightly down by around 0.55 percentage point from end-2016.

6.3 BANKING SYSTEM STRUCTURE

6.3.1 ASSET AND LIABILITY STRUCTURE

During 2017, banking system assets grew by around ALL 38.04 billion or 2.7%, compared to the ALL 89.16 billion or 6.76% growth a year earlier. The loan portfolio grew by ALL 0.9 billion, or 0.15% during this year.

The banking system’s share in the economy, measured by the total assets ratio to the Gross Domestic Product (GDP), continues to stay high. This ratio increased by 2.54 percentage points this year, standing at 92.50%. Meanwhile the loan to Gross Domestic Product ratio fell due to the growth of GDP against the decrease in the loan portfolio.

Chart 5 Equity ownership structure by country of origin and performance over time


0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

100.00%

1 2 3 4 5 6 7 8

Equity performance over time by country of origin

TurkishAustrianItalian

AlbanianGreekFrench

German

Others non-EU

26.09%

18.14%

14.73%

14.62%

14.27%

5.73%2.60%

2.26%1.55%

Equity structure by country of origin, 2017

Turkish

AustrianItalian

Albanian

Greek

French

German

Others non-EU

33 Bank of Albania


Table 4 Banking system total assets and loan portfolio’s share in GDPIndicators 2009 2010 2011 2012 2013 2014 2015 2016 2017 Total assets (in ALL billion) 886.30 990.60 1,120.20 1,187.98 1,234.32 1,293.72 1,318.13 1,407.29 1,445.33 Total assets/GDP (in %) 77.50 81.00 86.10 89.61 91.13 91.56 91.33 95.05 92.50 Total loans/GDP (in % 39.30 40.10 40.00 43.58 41.88 42.12 40.61 40.55 38.46


The following provides the banking system asset structure highlights, compared to the same period in the previous year:

• Increase in treasury and interbank transactions by ALL 21.3 billion, or 4.6%, mainly arising from:

- the increase in transactions with other banks, credit institutions and other financial institutions by ALL 30.9 billion or 14.5%;

- while a contrary impact came from the decrease Treasury bills transactions by ALL 3.98 billion (5.8%) and the decrease of transactions with the Central Bank by ALL 5.57 billion or 3.6%;

• Increase of client transactions (net) by ALL 74.18 billion or by 2.3%;• decrease of security transactions with foreign institutions (net) by ALL

10.04 billion or 2.7%.• increase in other assets by ALL 5.45 billion or 17%.• increase in fixed assets by ALL 2.24 million or 12.7%.

Table 5 Key banking system asset items

IndicatorsDecember 2015 December 2016 December 2017

Amount** Share** Change %*** Amount* Share** Ndryshimi

%*** Amount* Share** Change %***

1. Treasury and interbanktransactions 448.6 34.0 9.2 462.4 32.9 3.1 482.9 34.3 4.4

Of which: - - Transactions with the central bank 149.6 11.3 36.1 155.4 11.0 3.9 149.8 10.6 (3.6)- T-bills 73.1 5.5 (28.0) 68.6 4.9 (6.1) 65.5 4.7 (4.5)- Transactions with other banks 205.0 15.6 16.2 213.4 15.2 4.1 244.3 17.4 14.5 2. Transactions with customers (net) 511.8 38.8 1.5 523.6 37.2 2.3 542.7 38.6 2.3 3. Security Transactions (net) 311.3 23.6 (6.1) 371.5 26.4 19.4 361.5 25.7 (2.7) 4. Other assets 29.1 2.2 0.2 32.1 2.3 10.5 37.6 2.7 17.0 5. Fixed assets 17.3 1.3 (5.3) 17.6 1.3 1.5 19.8 1.4 12.7 Total assets 1,318.1 100.0 1.9 1,407.3 100.0 6.8 1,445.33 100.0 2.7

Source: Bank of Albania.Note: Items 1, 2, 3 in this table include accrued interest. *in ALL billion **in % to total assets ***in % to a year earlier

The following provides the banking system’s liability structure highlights, compared to the previous year:

• increase in transactions with customers by ALL 7.93 billion or 0.7%. This increase was mainly arising from the following:

- increase in private sector by ALL 10.6 billion or 0.93%, - decrease in public administration by ALL 1.92 billion or 0.93%;

• Increase in permanent resources by ALL 11.74 billion or 7%;• Increase in treasury and interbank transactions by ALL 14.31 billion or

22.9%, mainly driven by- increase in treasury bills and other acceptable bills, by ALL 7.6 billion

34Bank of Albania


or 26.03%; - increase of deposits with banks, financial institutions by ALL 2.3 billion

or 12.16%;- increase in current account by ALL 2.87 billion or 53.93%;- decrease in loans by ALL 1.88 billion or 30.48%;

• Increase in other liabilities by ALL 1.85 billion or 14%;

Table 6 Key banking system liability items

Indicators:December 2015 December 2016 December 2017

Amount* Share** Change %*** Amount* Share** Change

%*** Amount* Share** Change %***

1.Treasury and interbank transactions 49.5 3.8 (23.4) 62.5 4.4 26.3 76.8 5.3 22.9 2.Transactions with customers (gross) 1,100.3 83.5 3.3 1,157.8 82.3 5.2 1,165.7 80.7 0.7 3. Other liabilities 9.6 0.7 (20.1) 13.2 0.9 37.7 15.0 1.0 14.0 4. Permanent resources 158.1 12.0 13.6 167.7 11.9 6.0 179.4 12.4 7.0 Total liabilities 1,318.1 100.0 1.9 1,407.3 100.0 6.8 1,445.3 100.0 2.7

Source: Bank of Albania.*in ALL billion **in % to total liabilities ***in % to a year earlier

During 2017, the share of off-balance sheet items in total assets increased to 113.82%, from 102.62% at the end-2016. Table 7 shows that the annual growth during this year was driven by the growth in “commitments granted” item. Foreign currency transactions fell by ALL 8.3 billion, while the either items were up. The commitments received have the main share in off-balance sheet items, accounting for 84%, from 83.26% at the end of 2016.

Table 7 Change in off-balance sheet items compared to the previous year

Indicators:

Change from previous year December

2015

Ndryshimi me vitin paraardhës December

2016

Ndryshimi me vitin paraardhës December

2017

December 2015 December 2016 December 2017

In ALL bln In % In ALL bln In % In ALL bln In %TOTAL (86.8) (5.7) 1,423,481.0 20.7 1.5 1,566.8 78.4 5.0 1,645.2Commitments granted (34.2) (17.1) 166,258.5 20.7 12.5 187.0 15.3 8.2 202.3Of which: 0.0 0.0- Financing commitments (20.8) (30.1) 48,197.5 10.2 21.1 58.4 (4.0) (6.9) 54.4

- Guarantees 1.7 4.2 42,891.9 (1.5) (3.4) 41.4 5.7 13.7 47.1

- Security commitments (15.1) (16.8) 75,169.1 12.0 16.0 87.2 13.7 15.7 100.8

Commitments received (31.0) (2.5) 1,203,893.5 (1.5) (0.1) 1,325.0 65.0 4.9 1,390.0Of which: 0.0 0.0- Financing commitments (18.7) (67.2) 9,088.8 3.1 34.3 15.2 -3.9 (25.6) 11.3- Guarantees (12.1) (1.0) 1,193,304.6 (4.3) (0.4) 1,308.7 69.1 5.3 1,377.8Foreign currency transactions (28.5) (40.4) 42,115.9 1.6 3.9 43.8 -8.3 -19.0 35.4

Other commitments 7.6 522.9 9,096.2 0.8 8.8 9.9 -0.7 -7.4 9.2Commitments for financialinstruments

(0.7) (26.1) 2,116.9 (1.0) (44.9) 1.2 7.1 611.2 8.3


35 Bank of Albania


6.3.2 CONCENTRATION

Concentration indicator, as measured by the Herfindahl index calculated for total credit and assets registered the same level of 2016, while the deposit index showed a slight increase. All three indicators result at low levels.

Table 8 Herfindahl* (H) Index of asset, deposit and loan concentrationIndicators 2010 2011 2012 2013 2014 2015 2016 2017 Index H (assets 0.14 0.15 0.15 0.14 0.14 0.15 0.15 0.15 Index H ((deposits) 0.16 0.16 0.15 0.14 0.14 0.15 0.14 0.15 Index H (loans) 0.11 0.12 0.12 0.12 0.12 0.12 0.13 0.13

Source: Bank of Albania.* The values of this indicator fluctuate between 0 and 1. Values closer to 0 show low levels of

concentration.

6.4 MANAGEMENT OF BANKING ACTIVITY RISKS

6.4.1 CREDIT RISK

6.4.1.1 Lending

Total loans grew by ALL 0.9 billion or by around 0.15%, over 2017, similarly with the previous year where the trend of this portfolio was upwards. During this year, credit portfolio has been increasing in Q1 and Q3. The highest growth was reported in Q3 by ALL 10.4 billion. Meanwhile the other two quarters registered a decrease in the credit portfolio. The highest fall was reported in 2017 Q4 by ALL 6.8 billion.

Table 9 Quarterly credit growth in 2017Quarterly credit growth Q I Q II Q III QIV in ALL million 1,458.32 (4,132.87) 10,414.91 (6,821.03) In % 0.24 (0.69) 1.74 (1.12)


In seven of the months of 2017, the monthly performance of credit was down, where the highest fall was reported in December, April and May by ALL 5.72 billion (-0.94%), ALL 2.5 billion (-0.42%) and ALL 2.37 billion (-0.40%), respectively. In the other months of the year was registered a growth of credit portfolio. The highest increase is reported in September, August and March by ALL 5.54 billion (0.92%), ALL 5.03 billion (0.84%) and ALL 3.44 billion (0.58%), respectively. The monthly average credit growth stood at 0.01% for 2016.

Chart 6 Monthly credit growth in 2017 (in %)


0.01%

-2.00%

-1.50%

-1.00%

-0.50%

0.00%

0.50%

1.00%

1.50%

Jan. 2017

Feb. 2017

Mar. 20

17

Apr. 2

017

May 2

017

Jun. 2017

Jul. 2017

Aug. 2

017

Sep. 201

7

Oct. 2

017

Nov. 2

017

Dec. 2

017

Monthly credit performanceMonthly average growth

36Bank of Albania


The analysis of credit by type of entity shows a higher concentration to the private sector, around 65%, down by 2.1 percentage points, while lending to this sector, during 2017, decreased by ALL 12.18 billion (-3%). Credit to households and credit to public sector increased by ALL 9.33 billion (5.5%) and ALL 3.76 billion (13.1%), respectively.

The share of loans in the domestic currency was up approximately by 2.18 percentage points, standing at 43.56%. The credit portfolio composition by borrower and respective currency9 shows that around 58.4% of loans to enterprises are denominated in foreign currency. Within the credit portfolio in foreign currency, euro loans accounted for around 90.46%, from 86.6% in 2016, while U.S. Dollar loans accounted for around 9.48%, from 13.3% of the portfolio.

The share of foreign currency household loans in total household loans stood at 43%. Within the foreign currency credit portfolio to households, the euro loans accounted for 97.9% of the total loans, while the U.S. loans accounted for only 1.7% of the total loans.

By entity and purpose of use10 the analysis shows that “overdraft” to enterprises has the major share in the total credit portfolio (23.3%), followed by “investment for real estate” to households (20.1%); loans for “investment in real estate” to enterprises (18.5%); and by “other loans” to enterprises (15.5%).

In the meantime, in 2017, lending to enterprises for “equipment purchase” reflects the highest growth (21.1%), followed by lending to households for "consumption of non-durable goods" (14.8%). While

“overdraft” to households and “other loans” to enterprises showed the highest fall by 15.9% and 4.4%, respectively.

Table 10 Lending by sector and purpose of use (in ALL billion and share of each to total loans)

DESCRIPTION Dec.2015 Share in %

Dec. 2016

Share in %

Change in % Dec. 2015 - Dec. 2016

Dec. 2017

Share in %

Change in % Dec. 2016 - Dec. 2017

Total loans 529.7 100.0 530.7 100.0 0.2 533.8 100.0 0.6 Credit t o enterprises 373.6 70.5 370.2 69.8 (0.9) 362.3 68.4 (2.2)Overdraft 122.1 23.0 117.6 22.2 (3.7) 123.6 23.3 5.1 Working capital 62.6 11.8 61.8 11.6 (1.3) 51.6 9.7 (16.4)Equipment purchase 4.9 0.9 5.9 1.1 21.1 6.9 1.3 17.2 Real estate investments 95.3 18.0 100.2 18.9 5.1 97.8 18.5 (2.4)Other loans 88.7 16.7 84.7 16.0 82.3 15.5 (2.8)Credit to households 156.2 29.5 160.5 30.2 2.8 171.5 32.4 6.9 Overdraft 9.4 1.8 7.9 1.5 (15.9) 8.4 1.6 5.3 Non-durable goods 18.5 3.5 21.2 4.0 14.8 24.7 4.7 16.7 Durable goods 16.0 3.0 17.5 3.3 8.8 18.9 3.6 7.9 Real estate loans 102.4 19.3 103.9 19.6 1.5 106.5 20.1 2.5 Loans for other purposes 9.8 1.9 9.9 1.9 1.5 13.1 2.5 31.4

Source: Bank of Albania.Note: Data in the table refer only to resident customers and do not include accrued interests.

9 Data do not include non-residents.10 Data do not include non-residents.

Chart 7 Credit outstanding to enterprises and households as a percentage of total loans (in %)


25.0%

26.0%

27.0%

28.0%

29.0%

30.0%

60.0%

65.0%

70.0%

75.0%

Dec. `11

Mar. `12

Jun. `12Sep. `12Dec. `12

Mar. `13

Jun. `13Sep. `13Dec. `13

Mar. `14

Jun. ‘14Sep.`14Dec. `14

Mar. `15

Jun. `15Sep. `15Dec. `15

Mar. 2016

Jun. 2016

Sep. 2016Dec. 20

16Dec. 20

17

Credit to enterprises (left)Credit to households (right)

37 Bank of Albania


The structure of loans by termtomaturity has changed, from the previous year, showing a fall in the share of short and medium-term loans in favour of long-term loans. As at end- 2017, long-term loans have the major share in the total loan portfolio, followed by short and medium-term loans.

Table 11 Structure of outstanding credit by term to maturity (in %)Term to maturity

December 2013

December 2014

December 2015

December 2016

March 2017

June 2017

September 2017

December 2017

Short-term 34.0 33.7 33.9 33.1 31.3 30.6 30.5 30.6 Medium-term 17.9 17.9 18.3 44.4 20.7 20.3 19.2 18.7 Long-term 48.1 48.4 47.8 22.5 48.0 49.1 50.3 50.7


During 2017, the credit portfolio by currency shows that loans in foreign currency continue to have the highest share in total loans by 56.4%, albeit the trend has shifted from foreign currency loans to domestic currency loans, over the year. At the end of 2017, the share of loans in domestic currency to total credit portfolio increased by 0.6 percentage points, compared to the same period in the previous year.

Table 12 Structure of outstanding credit by currency (in %)Currency December

2013December

2014December

2015December

2016March 2017

June 2017

September 2017

December 2017

Lek 37.0 37.6 39.2 41.4 41.6 42.9 42.9 43.6Foreign currency 63.0 62.4 60.8 58.6 58.5 57.1 57.1 56.4


In 2017, the share of foreign currency loans unhedged against the exchange rate risk to total credit portfolio in foreign currency11, similarly to the previous year, decreased by 1.8 p.p. standing at 43.53%.

11 The credit unhedged against the exchange rate risk is defined in Bank of Albania's Regulation, No. 62, dated 14.09.2011 “On credit risk management”, Article 4, paragraph 2, letter c).

Chart 8 Volume of credit outstanding by currency (in ALL billion)


0

100

200

300

400

500

600

700

Dec. `12

Mar. `13

Jun. `13Sep. `13D

ec. `13M

ar. `14Jun. `14Sep. `14D

ec. `14M

ar. `15Jun. `15Sep. `15D

ec. `15M

ar. 2016

Jun. 2016Sep. 2016D

ec. 2016M

ar. 2017

Jun. 2017Sep. 2017D

ec. 2017

FX credit outstandingALL credit outstandingTotal credit outstanding

Chart 9 Share of foreign currency loans unhedged against the exchange rate risk in foreign currency

loan portfolio (in %)

Source:Bank of Albania.

20.0

25.0

30.0

35.0

40.0

45.0

50.0

55.0

60.0

Q4 `1

1Q

4 `12

Q1 `1

3Q

2 `13

Q3 `1

3Q

4 `13

Q1 `1

4Q

2 `14

Q3 `1

4Q

4 `14

Q1 `1

5Q

2 `15

Q3 `1

5Q

4 `15

Q1 `1

6Q

2 `16

Q3 `1

6Q

4 `16

Q1 `1

7Q

2 `17

Q3 `1

7Q

4 `17

Foreign currency loans unhedged against the exchange rate risk (in %)

38Bank of Albania


The structure of credit by sectors of the economy12 for 2017 does not show considerable changes on a year earlier. “Wholesale and retail trade” and “Repair of vehicles and motorcycles” remain the most credited sectors of the economy, sharing 22.6% in the portfolio, followed by “Processing industry” and “Construction” sharing 10.2% and 8.7% in the portfolio, respectively.

Chart 10 Lending by branches of economy (in % to total credit) Description December 2016 December 2017

In value Share in % In value Share in %Enterprises 370.3 69.8 364.3 68.6Agriculture, Forestry, Fishing 5.2 1.0 5.4 1.0Mining industry 7.2 1.4 7.7 1.5Processing industry 59.6 11.2 54.1 10.2Electrical energy, gas supply, steam and air conditioning 49.0 9.2 52.7 9.9

Water supply, treatment and management activities of residuals 0.2 0.0 0.2 0.0

Construction 47.0 8.8 46.4 8.7Wholesale and retail trade; Repair of vehicles and motorcycles 125.8 23.7 119.8 22.6

Transport and storage 7.0 1.3 7.8 1.5Accommodation and food services 13.7 2.6 13.6 2.6Information and communication 4.5 0.9 3.9 0.7Financial and insurance activities 1.7 0.3 2.8 0.5Real estate activities 4.9 0.9 4.2 0.8Professional, scientific and technical activities 0.9 0.2 0.8 0.2Management and facilitating services 0.4 0.1 0.4 0.1Public administration and defence; mandatory social security 1.6 0.3 1.7 0.3

Education 5.6 1.1 5.7 1.1Health and social work activities 2.8 0.5 3.8 0.7Art, entertainment and relaxation 5.2 1.0 3.0 0.6Other service activities 24.3 4.6 28.1 5.3

Activities of households as employers; undifferentiated goods- and services-producing activities of households for own use

3.7 0.7 2.1 0.4

Activities of international organisations and bodies 0.1 0.0 0.2 0.0 Households 160.5 30.2 169.5 31.9 Total 530.8 100.0 533.8 100.0

Note: Data in the table refer only to resident customers and do not include accrued interests.Source: Bank of Albania.

6.4.1.2 Assets quality

As at end-2017, non-performing loans stood at ALL 79.5 billion, down by ALL 30.18 billion, or 27.51% compared with the previous year. The non-performing loans indicator declined by 5.04 p.p. in annual terms, standing at 13.23% at end-2017.

12 Data do not include non-residents.

39 Bank of Albania


Net outstanding non-performing loans to total loan portfolio stood at 3.7%, down by 1.6 percentage points from December 2016. This indicator shows the high level of non-performing loans provisioning.

The qualitative loan portfolio shows that standard loans grew by 1.65 percentage points and special-mention loans grew by 3.36 percentage points. Meanwhile, the non-performing loans portfolio shows a decrease of the three categories “substandard”, “doubtful” and “lost” by 1.4 p.p., 1.06 p.p. and 2.54 p.p., respectively.

Table 13 Share of credit outstanding by category (in %)

Classification2013 2014 2015 2016 2017

Q I Q II Q III Q IV Q I Q II Q III Q IV Q I Q II Q III Q IV Q I Q II Q III Q IV Q I Q II Q III Q IV

Standard loans 66.8 66.3 67.3 68.4 67.6 67.0 66.1 70.0 70.6 72.6 73.5 74.4 73.7 74.0 73.4 76.4 77.6 74.3 77.0 78.1

Special mention loans 9.5 9.5 8.5 8.1 8.5 9.0 9.0 7.3 6.6 6.5 6.0 7.5 7.0 6.1 5.4 5.3 5.0 10.2 8.2 8.7

Sub-standard 9.6 9.7 9.0 7.6 8.5 7.5 8.3 6.7 6.4 5.3 5.3 4.2 4.9 6.1 6.8 4.7 4.6 4.0 3.4 3.3

Doubtful loans 6.2 5.3 4.0 4.3 3.5 4.2 4.5 4.2 4.6 4.8 4.5 4.0 4.5 3.9 4.1 3.3 2.3 2.2 2.5 2.2

Loss loans 7.9 9.2 11.1 11.6 11.9 12.3 12.1 11.8 11.8 10.7 10.7 9.9 10.0 9.9 10.4 10.2 10.6 9.3 8.8 7.7


Loan loss provisions amounted to ALL 57 billion, down by around ALL 20.34 billion from the previous year. Nevertheless, the “loan loss provisions to non-performing loans” was 71.7%, around 1.2 percentage points higher.

The share of net non-performing loans to regulatory capital fell by 7.4 percentage points from the previous year, down to 15.7%, showing a significant increase in the system’s capability to cover with capital the losses that may rise from loan deterioration. The improvement in this indicator was mainly due to the high decrease of non-performing loans by 30% and, to a lesser extent, by the increase of regulatory capital by 2%.

Chart 11 Performance of non-performing loans portfolio compared to the previous quarter (in %)


-20%

-15%

-10%

-5%

0%

5%

10%

Dec.t'12

Mar.' 13

Jun.'13

Sep.'13D

ec.t'13M

ar.' 14Jun.'1

4Sep.'14D

ec.t'14M

ar.' 15Jun.'1

5Sep.'15D

ec.t'15M

ar.' 16Jun.'1

6Sep.'16D

ec.t'16M

ar.' 17Jun.’17Sep.’17D

ec..’17

Non-performing loans growthCredit outstanding growth

Chart 12 Outstanding NPLs in the banking system


2.0%

6.0%

10.0%

14.0%

18.0%

22.0%

26.0%

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

Dec.t'1

2M

ar.' 13Jun.'13Sep.'13D

ec.t'13

Mar.' 14

Jun.'14Sep.'14D

ec.t'14

Mar.' 15

Jun.'15Sep.'15D

ec.t'15

Mar.' 16

Jun.'16Sep.'16D

ec.t'16

Mar.' 17

Jun.'17Sep.'17D

ec.t'17

Outstanding non-performing loans (ALL million, left)Non-performing loans/Outstanding loans (right)

40Bank of Albania


Regarding the credit quality by type of borrower, the non-performing loans indicator for enterprises decreased by 5.8 %, standing at 15.6%, while for households it decreased by 2.5 percentage points compared to the previous year, standing at 7.6%.

By currency, foreign currency non-performing loans portfolio had a larger

share by 14.7% (21.5% at the end of the previous year), compared with the lek non-performing loans by 11.3% (13.7% at the end of the previous year).

Of the foreign currency loan portfolio unhedged against the exchange

Chart 13 Loan loss provisions


50.0%

54.0%

58.0%

62.0%

66.0%

70.0%

74.0%

78.0%

-

50,000

100,000

150,000

200,000

Dec.'12

Mar.'13

Jun.'13

Sep.'13

Dec.'13

Mar.'14

Jun.'14

Sep.'14

Dec.'14

Mar.' 15

Jun.'15

Sep.'15D

ec.t'15M

ar.' 16Jun.'1

6Sep.'16D

ec.t'16M

ar.' 17Jun.'1

7Sep.'17D

ec.t'17

NPL provisions (1) (in ALL million, left)

Non-performing loans (gross) (2) (in ALL million, left)

Ratio (1)/(2) (in %, right)

Chart 14 Net non-performing loans to regulatory capital


0%

10%

20%

30%

40%

50%

60%

70%

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

Dec.`11

Mar.`12

Jun.`12Sep.`12D

ec.`12M

ar.`13Jun.`13Sep.`13D

ec.`13M

ar.`14Jun.`14Sep.`14D

ec.`14M

ar.' 15Jun.'1

5Sep.'15D

ec.`15M

ar.' 16Jun.'1

6Sep.'16D

ec.`16M

ar.' 17Jun.'1

7Sep.'17D

ec.`17

Net non-performing loansRegulatory capital

Chart 15 Credit outstanding to enterprises and households


0.0%

10.0%

20.0%

30.0%

-

20,000

40,000

60,000

80,000

100,000

120,000

Dec.'12

Mar.'13

Jun.'13

Sep.'13

Dec.'13

Mar.'14

Jun.'14

Sep.'14

Dec.'14

Mar.' 15

Jun.'15

Sep.'15D

ec.'15M

ar.' 16Jun.'1

6Sep.'16D

ec.'16M

ar.' 17Jun.'1

7Sep.'17D

ec.'17

Enterprises non-performing loans (in ALL million), leftHouseholds non-performing loans (in ALL million), left

Enterprises non-performing loans/Enterprises loans, rightHouseholds non-performing loans/Households loans, right

Chart 16 Outstanding non-performing loans by currency


0.0%

20.0%

40.0%

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

Dec.'12

Mar.'13

Jun.'13

Sep.'13

Dec.'13

Mar.'14

Jun.'14

Sep.'14

Dec.'14

Mar.' 15

Jun.'15

Sep.'15D

ec.'15M

ar.' 16Jun.'1

6Sep.'16D

ec.'16M

ar.' 17Jun.'1

7Sep.'17D

ec.'17

Outstanding ALL non-performing loans (in ALL million)Outstanding FX non-performing loans (in ALL million)

ALL non-performing loans/totalin ALL loans (right)FX non-performing loans/totalin FX loans (right)

41 Bank of Albania


rate risk, foreign currency non-performing loans classified as unhedged against the exchange rate risk accounted for 14% or 5 percentage points lower than in December 2016. The indicator of foreign currency non-performing loans unhedged against the exchange rate risk is 38.5%, down by 8.9 percentage points from the end of 2016. This decrease was attributable to the decrease of foreign currency non-performing loans by 8.9% and the decrease of foreign currency credit outstanding unhedged against the exchange risk by 40.1%.

The major share of the loan portfolio (76.7%) was collateralized, up by 5.5 percentage points from a year earlier. By type of collateral, the largest share of loans in the system, around 54%, was collateralized by real estate. Loans to households had a higher rate of collateralization with real estate at 63% compared to loans to enterprises at 46 %.

Table 14 Type of collateral by sector and currency (in %)

Type of collateralHouseholds Enterprises Total

ALL Foreigncurrency ALL Foreign

currenc ALL Foreigncurrency

Real estate 56% 73% 42% 48% 47% 54%Cash 4% 3% 1% 2% 2% 2%Other collateral 5% 9% 42% 24% 28% 20%Uncollateralized loan 35% 15% 15% 27% 22% 24%Total 100% 100% 100% 100% 100% 100%


The Bank of Albania conducts stress tests to measure a bank’s capital resilience to risks facing the banking activity. Analyses show that the current level of the banking system capital is sufficient to withstand a relatively high level of losses, which may arise from exposure to credit risk. This ability of the capital to withstand any potential losses was constant in 2017.

Chart 17 Quarterly performance of foreign currency NPLs unhedged against the exchange rate risk to

foreign currency credit outstanding unhedged against the exchange rate risk


0%

20%

40%

0

100,000

200,000

300,000

Dec.`12

Mar.`13

Jun.`13Sep.`13D

ec.`13M

ar.`14Jun.`14Sep.or`14D

ec.`14M


ec.'15M


ec.'16M


ec.'17

Outstanding FX NPLs unhedged against the exchange rate risk

FX NPLs unhedged against the exchange rate risk

FX NPLs unhedged against the exchange rate risk/Outstanding FX NPLs unhedged against the exchange rate risk

42Bank of Albania


6.4.2 LIQUIDITY RISK

In 2017, the overall liquidity situation in the banking system was adequate, showing a relatively low exposure to liquidity risk. The steady growth of deposits, as the main financing contributor to banks’ activity, the rather high level of liquidity (twice higher) being calculated as a ratio of liquid assets to short-term liabilities, the low credit to deposits ratio and the ability of the system to generate liquidity in the event of materialisation of extraordinary situations form an adequate framework for protection against liquidity risk.

Liquidity indicators are significantly above the regulatory requirement set out in Bank of Albania’s regulatory acts. In December 2017, the ratio of liquid assets to short-term liabilities in the banking system was 40.79%13, up by 0.22 percentage point from the previous year, as a result of short-term liabilities reducing (-1.34%) faster than liquid assets (-0.8%).

In December 2017, the liquidity in foreign currency, increased at 32.1%14 (from 31.4% in December 2016), owing to the higher increase of liquid assets in foreign currency and the decrease of short-term liabilities. The largest increase in liquid assets in foreign currency is due to the maturity of the "Investment Securities" with a maturity up to 1 (one) month and the channelling of these funds to "deposits with a residual term to maturity of up to 7 days with banks or financial institutions". Liquid assets in lek remain the main support of liquidity at 57 % of total liquid assets (58.2% of the total liquid assets in December 2016) and the level of the indicator in lek stood at 51.26% in December 2017, almost unchanged from the previous year.

6.4.2.1 Banking system deposits15

Customer deposits remain the most important and stable source of financing for the Albanian banking system, sharing 82.27% (December 2016) of total liabilities. In December 2017, total value of deposits in the system amounted ALL 1,162 billion, recording 0.74% annual growth from the previous year. The share of the domestic currency to total deposits fell at 47.08%, from 47.2% in December 2016. The maturity structure shifted to short-term maturities, given that the share of current accounts and demand deposits increased, whereas time deposits shrank, driven by the continuous downward interest rates in the market.

13 The minimum required level for this indicator, as laid down by the regulatory requirements, is 20%.

14 The minimum required level for this indicator in the Albanian lek and foreign currency, as laid down by the regulatory requirements, is 15%.

15 “Deposits" refers to all sources from clients, including current accounts, time deposits, demand deposits and other accounts, except when otherwise specified.

43 Bank of Albania


6.4.2.2 Concentration of deposits

In December 2017, ten largest depositors accounted for 5.46% of total banking system’s deposits, from 6.16% in December 2016. The other groups of larger depositors show a similar contracting performance16.

Households’ deposits remain the main base of banking system’s deposits, sharing 83.24% in total deposits, down by around 0.19 percentage point, from the previous year.

This behaviour is due to the combination of effects from market interest rates with external factors. During this year, business accounts grew at higher rates than households’ accounts (3.27% and 0.46% respectively).

6.4.2.3 Loan to deposit ratio

The loan to deposit ratio in December 2017 was 51.55% (from 51.86% in December 2016) and reflects a structure of asset-liabilities that facilitates liquidity management and provides potential lending incentives. During 2017, the indicator fell slightly due to the different growth rates of credit portfolio and total deposits (the latter increased more). This ratio has always showed higher values in foreign currency, although during 2017, under the impact of the above-stated factors, the respective ratio in foreign currency dropped from 57.6% to 54.98%.

6.4.2.4 Liquid assets of the banking system

During 2017, liquid assets fell by ALL 3.52 billion, or 0.8%, mainly a result of the maturity of the investment portfolio in banks' securities.

Total liquid assets of the banking system amounted to ALL 436.8 billion, in December 2017. Government securities have the main share in their structure (by 51.18%, from 51.37% in December 2016).

6.4.2.5 Other financial sources

Other financial sources in the banking system have a relatively low share in total assets, about 5.31%, expanding slightly during the year (December 2016, 4.43%). Liabilities to financial institutions and repurchasing agreements had the main share in this item.

16 20 Larger depositors: 7.54% in 2017, from 8.37% in 2016. 50 Larger depositors: 10.83% in 2017, from 11.68% in 2016.

44Bank of Albania


6.4.2.6 Stress tests

Stress tests, which assume various scenarios of unpredictable events and factors that may have a negative impact on liquidity, have shown that all banks may successfully withstand such situations.

6.4.3 MARKET RISKS

The overall situation of the banking system exposure to market risks remained at low levels during 2017. In the framework of market risks assessment, the trading book and the banking book include the indicators (risk factors) of exposure to: change of interest rate in the banking book; exchange rate risk in the balance sheet; the position risk (in specific terms, change of interest rates in the tradable and placement portfolio) and the capital buffers to cover potential losses from these risks.

Capital requirement for market risk at the system level constitutes only 1.25% of the total capital requirement. This exposure mainly arises from the exchange rate risk as the trading portfolio is at low levels.

Market risk originating from exposure to interest rate risk - measured as the change of exposure value in the banking book after the standard shock in the interest rate to regulatory capital - stood at satisfactory rates, reflecting a balanced structure of repriced assets and liabilities in the banking system. In December 2017, the value of this indicator was 3.34%, compared to (4.54%) in December 201617. Certain banks show change from the average, albeit within limits and far from the regulatory bounds, as a result of the average maturity of the loan portfolio and investments in securities.

Market risks originating from the exchange rate, assessed from the dynamic of open position in foreign currencies, continues to be low and this behaviour dominated throughout the annual period. In December 2016, banking system’s exposure to exchange rate risk was “long”, at ALL 9.5 billion, accounting for 6.68% of the banks' regulatory capital18. These levels are assessed as far lower compared to the regulatory limit of 30%. Referring to individual banks, two banks are exposed above the system indicators. This position is due to the structure of the balance sheet.

Market risk in the trading portfolio for the banking system is rather low showing a downward dynamic, and was assessed as such throughout the analysed annual performance. Trading portfolio at system level appears rather low to total assets (0.6% in December 2017, from 1.1% in December 2016).



45 Bank of Albania


Market risk, originating from interest rates in non-resident trading portfolio of placement (non-resident portfolio of placement bears market risk factors), is assessed as low against total assets.

Stress tests for the exchange rate risk, using various shock scenarios from the exchange rate, show that both the banking system as a whole and individual banks will withstand successfully such situations.

6.4.4 OPERATIONAL RISK

Exposure of the banking system to operational risk, in absolute gross value, increased from the previous year. Measured in relation to the regulatory capital of the system, this loss results at 9.61% versus 7.41% in the previous year. The increase was largely influenced by a single external fraud event, focused on the total of losses in the "Retail Banking Activity". While gross operational losses were up by 25%, the total number of occurred events fell by 38% in 2017 compared to 2016. However, this added value of losses has a low financial impact on banks since the events occurred are covered at adequate level by insurance contracts, thus transferring the major part of the risk to insurance institutions.

A specific feature of the developments during the year was the increased attention of banks in the management of operational risk. As a result of the improvement of day-to-day processes, potential issues were identified early and addressed in due time, positively contributing to the decrease of the events.

6.4.4.1 Information Technology

Continuous changes in information technology and the more diverse issues arising from the use of technology have contributed to greater attention and more investments in information security at banks. Special attention is given to increasing information security and continuous risk monitoring related to it. During 2017, a large part of these investments targeted cyber security, in line with the international trend of information technology. In this framework, during 2017, a SWIFT project (Client Security Program) was launched and aimed to increase the security of the information (payments) which are channelled and processed through this platform. The drafting and on-site implementation of business continuity plans in extraordinary events had an important impact on the reduction of information technology risk. Banks have increased their awareness regarding business continuity not only in natural or major disasters but also in the various incidents that may occur during work, especially in the incidents related to information security. The policies and procedures framework related to ICT has been continuously improving; however, due to the broad spectrum of activities it covers and the dynamic developments in this field, its completion and improvement remains a continuous process.

46Bank of Albania


6.4.5 REPUTATIONAL RISK

Reputational risk, the risk that may hamper banks and financial institutions immediately, has the following key assessment elements: reasonable doubts about the involvement or use of financial institutions for money laundering / terrorist financing; lack of transparency with clients; failure to comply with working conditions contractual terms, etc.

During 2017, banks and financial institutions have made positive efforts in terms of anti-moneylaunderingandterrorismfinancing. In particular, banks have in place adequate structures and systems in this regard and have increased the effectiveness of preventive measures on money laundering and terrorism financing, driving to higher number and quality of suspicious activity reports. Yet, given the wide span of banking services and the development of electronic products that allow transactions to be carried out remotely, certain elements may take advantage of loopholes to perform or conceal illegal transactions. In this view, notwithstanding the above-stated efforts, there is always room to improve the control and analyses systems, with a view to increasing attention and identifying possible schemes used for money laundering and terrorism financing. Throughout the inspections carried out by the supervisory authority, concrete recommendations have been issued, and supervisory measures have been taken in certain cases.

Overall, on-site inspections carried out at banks during 2017, have found adequate compliance with legal and regulatory obligations, as well as effective management of risks of money laundering / terrorism financing. Thus, the institutions have:

• Draftedandimplementedappropriatepoliciesandprocedures;• Builtadequatestructures;• Developedcentralizedsystemsandtheirfunctioning;• Implementedinternalauditsystems;• Draftedandimplementedtrainingprograms;• Compliedwithreportingrequirements,thequalityofsuspiciousactivity

reports (SARs) and the analysis of complex and unusual transactions that have been or are being attempted to be carried out; etc.

By decision of Supervisory Council of the Bank of Albania No 22, dated 05.04.2017, among others, in the framework of improving the risk-based supervision process, several important amendments were approved to the Regulation No 44, dated 10.06.2009, for all institutions subject to its jurisdiction (banks, non-bank financial institutions, savings and loan associations, their unions and foreign exchange bureaus) regarding anti-money laundering and financing of terrorism.

The amendments consist in additional requirements for financial institutions for reporting qualitative and quantitative data, according to a standardised form, on annual basis (including a questionnaire). The amendments, in addition

47 Bank of Albania


to the problems identified in the implementation of the applicable legal and regulatory framework, aimed to address the implementation of international standards and recommendations provided in the fourth round of Albania’s evaluation by Moneyval’s experts.

In this context, certain reporting obligations were set, which consist in reporting qualitative and quantitative information, mainly on:

• classificationofclientsbasedonrisk;• classificationoftransfersbasedonrisk;• numberofreportedSARsandtherelevantanalysis;• responsiblestructure;• training;• problemsidentifiedbyinternalaudits;• internalriskassessmentforAML/CTF;etc.

This framework was completed at the beginning of July 2017 with the compilation and approval of a methodology for off-site examination dedicated to the anti-money laundering and financing of terrorism (AML/F+CFT) risk, accompanied with a matrix of risk assessment in this field. The AML/CFT risk assessment methodology is an important instrument to support the risk-based approach of supervision processes and allows for a general judgement regarding the level of this risk (Low, Medium, High). This assessment further serves as a good basis for designing the priority of supervision and resources, with focus on high risk subjects and activities.

Based on data reports for 2016, the Bank of Albania, for the first time, performed the evaluation of this risk exposure of the institutions, and currently has consolidated it with the analyses for the data of 2017. The results of this evaluation shall serve to the supervisory process, focusing on institutions and activities that pose high risk in terms of AML/CFT

The analyses carried out for 2017, in accordance with this methodology, showed the following results:

The evaluation system of the risk of money laundering and financing of terrorism (ML/FT) consists in the integration of the evaluation on the quantity of risk and the evaluation on the risk management quality, to provide a final evaluation. Sixty financial institutions were subject of the evaluation (16 banks, 31 NBFIs and 13 SLAs).

The integrated evaluation showed: medium risk for 31 institutions (12 banks, 13 NBFIS and 6 SLAs); and high risk for 29 institutions (4 banks, 18 NBFIs and 7 SLASs), of which, 20 institutions (1 bank, 12 NBFIs and 7 SLAs) were automatically evaluated with high risk due to non-reporting.

48Bank of Albania


Table 15 Integrated evaluations of money laundering and terrorism financing risk

No. of institutions No. Total institutions Banks NBFIs SLAs

Evaluation High Risk

Medium Risk

Low Risk

High Risk

Medium Risk

Low Risk

High Risk

Medium Risk

Low Risk

High Risk

Medium Risk Low Risk

Integrated evaluation 29 31 - 4 12 - 18 13 - 7 6 -Source: Bank of Albania.

The integratedevaluationof transfers by institutions (23 total institutions, of which: 16 banks and 7 NBFIs) was an integrated part of risk evaluation for AML/CFT. The integrated evaluation of transfers consists in the integration of two evaluations: evaluation of outgoing and incoming transfers, both in Albania and abroad; and the evaluation of the value of incoming and outgoing transfers, both in Albania and abroad.

The integrated evaluation of transfers, showed: low risk (L) for 3 institutions (3 NBFIs); averagely low risk for (AL) for 2 institutions (2 banks); averagely high risk (AH) for 4 institutions (4 banks); and high risk (H) for 14 institutions (10 banks and 4 NBFIs).

Table 16 Integrated evaluation of transfers for money laundering and terrorism financing risk

No. of institutions No. Total institutions Banks NBFIsAssessment L: AL: AH: H: L: AL: AH: H: L: AL: AH: H:Integrated evaluation of transfers 3 2 4 14 - 2 4 10 3 - - 4


For this year also, the level of risks identified during the supervision process, based on the self-evaluation document of AML/CTF risk conducted by the institutions, is estimated as below:

- Low risk level for new products and services as a result of providing traditional products/services;

- Low risk level for new technologies as a result of limitations of the amount (internet banking and prepaid cards;

- Low risk level, for relations with well-known and international correspondent banks;

- Moderate level of geographic risk, especially for Internet-related transfers;

- Moderate risk level, due to strong controls by parent banks, as a result of the participation of international reputable groups.

- Moderate level for some cases of shortcomings regarding the identification of the beneficiary.

In supervising this risk, the Bank of Albania has also closely cooperated with the responsible authority, the General Directorate for the Prevention of Money Laundering, through conducting joint inspections, exchanging information, coordinating administrative measures, coordinating reporting to international organizations, etc. as well as with the Ministry for Europe and Foreign Affairs

49 Bank of Albania


through the distribution to licensed institutions, of UN Security Council resolutions and Council of Ministers' decisions on sanctioning and updating the list of terrorist financiers.

In 2017, the supervision was mainly focused on areas such as:- Policies and procedures;- Centralized structures and systems;- Identification of the beneficial owner and the ownership structure of the

client;- Quality of suspicious activity reports (SAR) and the analysis of complex

and unusual transactions that have been or are being attempted to be carried out;

- Categorizing clients and transactions according to the risk level;- Implementation of legal obligations;- Internal audit systems.- Effective management of risks arising from money laundering/terrorism

financing.

Types of problems identified during on-site inspections on AML/CTF in banks on Due Diligence and Enhanced Due Diligence, mainly related to:

- Justification of transactions conducted for the bank’s employees; - Discrepancy of bank data with the profile of the client and his activity;- Provision of documents that prove the source of funds, which are mainly

in the form of statement for cash transactions by clients in individual and business accounts;

- Updating the information for companies with valid identification documents;

- Possession of documentation and information about the relationships among some companies that carry out incoming transfers at high amounts in their accounts;

- Accurate identification of the ownership structure when establishing a business relationship with companies with bearer shares, when legally valid documents are not used and possible changes in the ownership structure are not monitored on on-going basis;

- Completion of data on business clients in the system, classification of clients by risk, when deficiencies were identified, in breach of the Law on ALM/CTF

- The due diligence and enhanced due diligence processes for the approval practices of deciding the relationships with international financial institutions, the measures for the implementation of the internal framework of the bank by the responsible structures on anti-money laundering issues;

- Inclusion of all the banks’ employees in the AML training process; - special focus by the internal audit regarding the observation by the

bank of the applicable legal framework and the regulatory framework of the Bank of Albania on these issues;

- Review of lending practices to prevent the use of credit in criminal

50Bank of Albania


activities.Types of problems identified during the on-site inspections on AML/CTF

in non-bank financial institutions and savings and loan associations on Due Diligence and Enhanced Due Diligence, mainly related to:

- Definition in the regulation of the person responsible for AML issues at the head office and branches.

- Definition in the regulation of the preventive measures regarding the enhanced due diligence (with high risk)

- The assignment of a responsible person as the “Administrator” and its report to the Bank of Albania and DGAML, in compliance with Article 8, paragraph 2 and paragraph 4 of the Regulation No. 44, dated 10.06.2009 of the Bank of Albania “On the prevention of money laundering and financing of terrorism”,

- The compilation of an annual training plan and the training of employees;- Collection and the correction of the information on the source of funds

of the client;- Improvement of the centralised system for the collection and analysing

of data regarding the identification and the measuring of risk, by establishing a risk profile for each member.

Transparencyandpublicationofinformation by licensed institutions have been at the attention of the supervisory authority during 2017 in order to guarantee transparency vis-à-vis the client as an important element of public confidence in the financial system in Albania.

Compliance with obligations of banks to report to the Bank of Albania was subject to analyses and monitoring with regard to the implementation of the regulatory framework on transparency and issues relating to fully reporting or publishing the working conditions on the banks’ website. Banks' behaviour and measures relating to public transparency and disclosure of financial information have been consistently and cautiously examined through on-site and off-site supervision. The establishment of requirements on the content and manner of disclosure of pre-contractual and contractual information to the borrower, before and during the extension of mortgage loans to households, and the regulation of consumer loans have been at the focus during the day-to-day implementation of legal and regulatory requirements.

In the framework of the undertaken measures, the banking sector’s commitment on matters of transparency and disclosure of information improved. Nevertheless, from on-site inspections, issues remain for the financial system to address, mostly related to:

- providing the customer with the amortization plan - unifying the NEI's value in consumer credit documentation and making

this indicator more transparent to customers;- personalizing NEI's value in pre-contractual information on overdraft

credit, personalizing pre-contractual information on consumer credit of

51 Bank of Albania


the credit card and clarifying the base rate for calculating NEI;- focusing on transparency issues during branch examinations;- drafting a policy on transparency based on the Regulation No. 59,

dated 29.08.2008, "On transparency of banking and financial products and services", as amended;

- drafting an internal methodology for calculating interest rates on loans pursuant to Article 5, paragraph 8 of Regulation No. 59, dated 29.08.2008, "On transparency of banking and financial products and services", as amended;

- reviewing all cases when penalties were applied for delinquent days on a higher interest rate than that foreseen in the contract, reimbursement of customers resulting in loss from this error and taking measures to prevent the same phenomenon from happening;

- updating credit and deposit contracts with the elements set forth in Regulation no. 59, dated 29.08.2008, "On Transparency for Banking and Financial Products and Services", as amended;

- maintaining data on customer complaints pursuant to Article 12, paragraph 3 and 4 of regulation no. 59 of the Bank of Albania etc.

During 2017, as mentioned above, an external examination was conducted on the minimum requirements for the publication of financial reports by banks and branches of foreign banks by quarter. In spite of the positive developments in the banking system, regarding the applicability of the Bank of Albania regulatory requirements on publications, during 2017, shortcomings were also noted for which the Supervision Department has taken appropriate measures for banks to fix them. The shortcomings identified during the publication of information consist in:

- risk mitigation techniques- bank's financial situation - main contractual peculiarities of capital instruments, particularly in the

case of subordinated debt instruments - standard approach for the bank's capital adequacy assessment- summary information on credit risk- each exposure category- counterparty credit risk - investments in shares included in the banking book - liquidity risk - accounting policies.

Treatmentofcustomers’complaint is a crucial matter in the framework of transparency and consumer protection in the financial sector. During 2017, a total of 124 complaints / requests / letters were received from individuals, businesses, natural persons and state institutions. About 95% of the complaints fall outside the realm of competence of the Bank of Albania. The charts below provide statistical data on the addressed complaints:

52Bank of Albania


Individuals constitute for the highest number of solved complaints by 77%.

As shown below, credit products accounts for the largest share by 53%.Some information related to the typology of claims, the manner of their

drafting and the necessary documentation is provided in the following link on Bank of Albania’s website:

https://www.bankofalbania.org/Supervision/Handling_complaints/

Chart 18 Number of complaints handled by the Bank of Albania over the years


54

106115

124

2014 2015 2016 2017

Complaints

Chart 19 Share of complaints by segment of complainers


Households 77%

Business18%

Public Institution. 4%

Natural person 1%

Chart 20 Share of complaints by segment of published products


Accc. frozen / Order of con�sc

8%Deposits 3%

Credit Card/Pre-paid /Debit

3%

Credit53%Credit/ relationship

amng shareholders1%

Current accounts11%

Financial leasing 2%

Others14%

Transfers5%

Chart 21 Share of complaints by typology


Others70%

N-n providinginfo/doc/replay

by the bank9%

Unfair application of commission

8%

Non-information from the bank on thechnage ofconditions

8%

IR applicationdifferent from

the contract3%

Data review in CR

2%

53 Bank of Albania


6.4.6 PROFITABILITY

6.4.6.1 Net result and its structure

The financial result was positive in 2017, at ALL 22.07 billion or ALL 12.79 billion higher than in 2016.

The first quarter contributed most to the financial result for 2017, by a net financial result around ALL 6.04 billion, trending slightly downward in the next quarters. This was mainly due to the increase in expenditures for provisions and for banking activity during the last quarters of the year. As a result of the significant increase in net result from other activities and the decrease in provision expenses, the profit for 2017 was higher than that of the previous year, even though net interest income declined.

The net result did not fluctuate significantly during 2017; it grew constantly throughout the months of the year, recording the highest growth in March by ALL 3.29 billion.

6.4.6.2 PROFITABILITY INDICATORS

Due to the higher positive financial result than in the previous year, the main profitability ratios, Return on Average Assets (RoAA) and Return on Average Equity (RoAE), increased significantly in 2017. At the end of 2017, RoAA was 1.56 per cent and RoAE was 15.71 per cent compared to 0.69 per cent and 7.15 per cent, respectively at the end of 2016.

Table 17 Main profitability indicators (in %, cumulative)

Indicators December 2017

December 2016

December 2015

December 2014 June 2014 December

2013 June 2013 December 2012 June 2012

RoAA 1.56 0.69 1.20 0.89 0.88 0.54 0.25 0.33 0.42

RoAE 15.71 7.15 13.16 10.53 10.38 6.43 2.93 3.78 4.79 Source: Bank of Albania.

The next two tables show the banking system profitability by main activity and the dynamics of the equilibrium between the collection of interest-paying liabilities and investment in income-earning assets.

Table 18 Profitability indicators from the main activity (in %, cumulative) December

2017 December

2016 December

2015 December

2014June

2014December

2013June

2013December

2012 June

2012 Interest income/average earningassets (1) 3.8 5.2 5.7 6.28 3,21 7.32 7.39 7.73 7.76

Interest expenses/averageearning assets (2) 0.6 1.0 1.3 2.10 1.22 3.42 3.61 3.72 3.72

Net Interest Margin (NIM)[(1) - (2)] 3.2 4.2 4.4 4.18 1.99 3.89 3.78 4.01 4.04


Dhjetor 2017 Dhjetor 2016 Dhjetor 2015 Dhjetor 2014

3.8 5.2 5.7 6.28

0.6

1.0 1.3 2.10

3.2 4.2 4.4 4.18

54Bank of Albania


During 2017, banking activity based on interest-earning instruments was lower compared to the previous year. The negative result was due to interest income to average assets declining faster than interest expenses to average assets.

Table 19 Average profitability ratios (in ALL million)

Indicators 2017 Q4 2017 Q2 2016 Q4 2016 Q2 2015 Q4 2015 Q2

Average earning assets (1) 1,145,687.3 1,136,912.3 1,125,051.5 1,121,035.2 1,107,966.5 1,094,642.5

Average paying liabilities (2) 1,317,211.1 1,313,686.8 1,165,305.5 1,127,618.1 1,119,565.7 1,116,190.0

AAverage assets (3) 1,413,877.0 1,403,702.8 1,347,001.9 1,326,177.5 1,312,711.6 1,305,607.5

(1) / (3) 81.03% 80.99% 83.52% 84.53% 84.40% 83.84%

(2) / (3) 93.16% 93.59% 86.51% 85.03% 85.29% 85.49%Source: Bank of Albania.

At end-2017, the ratio of average income-earning assets to average assets fell by 2.49 percentage points (from 83.52% to 81.03%), compared to end of the previous year, driven most by the average assets increasing faster (4.97% or ALL 66.92 billion) than average income-earning assets (2.69% or ALL 29.96 billion). The average expense-bearing liabilities to average assets increased by 6.65 percentage points (from 86.51% to 93.16%), compared to end of the previous year, driven by the average expense-bearing liabilities increasing faster (ALL 197.64 billion or 17.7%) than average assets.

The system efficiency indicator at the end of 2017 increased by 4.1 percentage points from the previous year as operating income dropped ALL 3.61 billion or 6.7%, while operating costs rose ALL 0.38 billion or 1.31%.

Table 20 Performance of efficiency indicator in ALL million

Indicators Dec. 2017

Dec. 2016

June 2016

Dec. 2015

June 2015

Dec. 2014

June 2014

Dec. 2013

June 2013

Dec. 2012

June 2012

Operating expenses (1)

29,530.7 29,143.1 13,944.7 28,539.1 13,486.3 27,001.7 12,963.5 26,223.2 12,660.9 25,930.6 12,264.7

Operating income (2)

54,185.5 57,799.8 28,098.5 49,995.9 25,267.0 43,659.7 20,096.1 44,974.3 22,326.3 39,328.6 17,277.2

Efficiency ratio (1)/(2)

54.5% 50% 50% 57% 53% 62% 65% 58% 57% 66% 71%


6.4.7 CAPITAL ADEQUACY RATIO

6.4.7.1 Shareholders’ equity

As at end-2017, the shareholder’s equity of the banking system amounted to ALL 146.95 billion, up ALL 10.47 billion (or 7.67%), y-o-y, compared to the higher increase, ALL 11.3 billion (9.01%), in 2016.

55 Bank of Albania


Shareholder’s equity decreased in 2017 Q2 (-1.04%). The growth during the rest of the year ranged between 2.07 and 3.78%. It grew most in the third quarter, and less in the first quarter.

The paid in capital provided the largest material contribution to shareholders’ equity growth, up by around ALL 5.29 billion (or 4.3%) and the fall of the revaluation surplus down by around ALL 6.99 billion (or 147.60%) compared to the same period a year earlier. These developments are positive indicators for sustaining the banking activity with the necessary sources of income generated by banks.

Table 21 Shareholders’ equity structure and its components’ performanceIndicators December 2017 December 2016 December 2015

ALL million % ALL million % ALL million %

Shareholders’ equity 146,953.0 100.0 136,883.1 100.0 125,566.4 100.0

Paid-in capital 128,713.8 87.6 123,416.2 90.2 113,048.2 90.0

Share premium 6,479.8 4.4 6,259.1 4.6 5,736.5 4.6

Reserve 12,918.5 8.8 12,289.2 9.0 11,869.4 9.5

Revaluation difference (2,255.5) (1.5) 4,738.5 3.5 5,235.6 4.2

Earnings/retaired loss (20,977.5) (14.3) (19,090.1) (13.9) (26,051.1) (20.7)

Earnings/loss for the period 22,073.8 15.0 9,270.1 6.8 15,727.8 12.5 Source: Bank of Albania.

6.4.7.2 Capital adequacy ratio

Against the minimum regulatory benchmark of 12%19, the Capital Adequacy Ratio (CAR), as a key supervision indicator stood at 16.6% at end-2017. This indicator was up by 0.58 percentage point, compared to end-2016, and 0.74 percentage point compared to end-2015.

6.4.7.2.1 Regulatory capital

The banking system's regulatory capital totalled ALL 143.14 billion, up by ALL 0.8 billion (0.56%) compared to 2016.

19 For some banks, the level was required higher than the regulatory minimum.

Chart 22 Shareholder’s equity


-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

Dec

’11

Mar

ch'1

2Ju

ne'1

2Se

pt’1

2D

ec12

Mar

ch'1

3Ju

ne'1

3Se

pt’1

3D

ec'1

3M

arch

'14

June

'14

Sept

'14

Dec

'14

Mar

ch' 1

5Ju

ne'1

5Se

pt'1

5D

ec’1

5M

arch

' 16

June

'16

Sept

'16

Dec

'16

Mar

ch' 1

7Ju

ne'1

7Se

pt’1

7D

ec'1

7

Shareholder’s equity Growth (in %)

Chart 23 Capital adequacy ratio and its compo-nents


14.0%

14.5%

15.0%

15.5%

16.0%

16.5%

17.0%

17.5%

18.0%

-

200,000

400,000

600,000

800,000

1,000,000

Dec`11M

ach`12June`12Sept`12Dec`12M

arch`13June`13Sept`13Dec`13M

arch`14June`14Sept`14Dec`14M

arch'15June'15Sept'15Dec`15M

arch' 16June'16Sept'16Dec`16M

arch'17June'17Sept'17Dec`17

Regulatory capitalRisk-weighted assetsCAR (in %)

56Bank of Albania


Banking system’s core capital is the main component of the regulatory capital of the system, accounting for 91.07%, up by 2.93 percentage points, compared to the previous year, hence providing evidence for a qualitatively sound and stable regulatory capital.

Supplementary capital of the system, which consists mainly of the subordinated debt, was ALL 12.78 billion, from ALL 16.97 billion at end-2016.

6.4.7.2.2 Total risk-weighted assets and off-balance sheet items

Total risk-weighted assets and off-balance sheet items fell compared to the previous year, by ALL 26.14 billion or 2.94%. Capital requirement for credit risk by 83.6% has the highest share in total risk-weighted assets and off-balance sheet items, followed by the capital requirement for operational risk by 9.65% and capital requirement for market risk by 1.66%. The additional element of the package of measures for actions with non-residents in the total of risk weighted assets accounts for 5.03% of the total.

6.5 NON-BANK FINANCIAL INSTITUTIONS AND SAVINGS AND LOAN ASSOCIATIONS

6.5.1 NON-BANK FINANCIAL INSTITUTIONS

6.5.1.1 Overview

In December 2017, there were 31 non-bank financial institutions, up by 3 institutions, compared to December 2016. Table 20 shows their categorization according to the financial activities for which they are licensed.

57 Bank of Albania


Table 22 Activity of non-bank financial institutions

No. Non-bank financial institutions

Payment and Money

Transfer Service Activities

Credit risk activities Foreign exchange;

Lending Microcredit Financial leasing. Factoring

Foreign exchange services

Foreign Exchange Advisory Services

1 Financial Union Tirana √ √ √

2 FIRST ALBANIAN FINANCIAL DEVELOPMENT COMPANY – FAF SH.A. √

3 AK-INVEST √ √ √ √4 Fondi Besa √5 NOA √ √ √6 Easypay √7 Posta Shqiptare √8 Tranist √ √ √9 M-Pay √10 Platinium Investment √11 Raiffeisen Leasing √12 FIN - AL √ √13 Landeslease √14 Porshe Leasing √15 Albania Leasing √16 Crimson Finance Fund Albania (CFFA) √ √17 Mogo Albania √18 AGRO & SOCIAL FUND SH.P.K. √19 Capital Invest √20 Micro Credit Albania √21 Iutecredit Albania √22 Agro Partner √23 Kredo Finance √24 Albanian Factoring Services √25 Omnifactor √26 Tirana Factoring & Lease √ √27 Albanian Financial Institution √ √ √28 Kastrati √29 Pay & Go √30 RAEA FINANCIAL SERVICES SH.P.K. √ √ √31 Vodafone M-Pesa √ √ √


6.5.1.2 Assets of non-bank financial institutions

Total assets for non-bank financial institutions in December 2017 reached ALL 38.15 billion, increasing by ALL 3.14 billion or 8.97%. Non-bank financial institutions' assets account for about 2.6% of total banking system assets, almost unchanged from the previous year.

Table 23 Total assets of NBFIs, (in ALL billion) December ‘16 March '17 June ‘17 September ‘17 December ‘17Total assets of NBFIs* 35.01 35.21 35.10 36.32 38.15

Source: Bank of Albania. *The total of NFBI’s assets does not include data for Albanian Post Office (Posta Shqiptare) as

its balance sheets presents data for other non-financial activities as well.

58Bank of Albania


Credit portfolio accounts for the main share in the assets’ structure of non-bank financial institutions by about 57.10%. The rest of the assets are oriented towards liquid assets (17.4%), variable-income securities (12.7%).

NBFIs are mostly financed through borrowing (52.7% of liability) and own capital (39.2% of liability). Loans consist of loans from other financial institutions - non-residents (38%), domestic - banks (36.7%) and other resident sources20 (13.5%).

In 2017, most NBFIs were well capitalised.

6.5.1.3 Outstanding loan portfolio developments and activity volume

At the end of 2017, the gross portfolio of NBFIs reached ALL 24.21 billion, up by ALL 3.33 billion (or 15.9%) compared to the previous year. Credit institutions have the biggest contribution to this growth, by about ALL 2.82 billion (or 20.0%). The portfolio of factoring and leasing institutions, this year, increased by ALL 54.88 and ALL 453.66 million, respectively.

Table 24 NBFIs’ loan portfolio, net and gross, December 2016-December 2017, in ALL billion

December ‘16 March '17 June ‘17 September ‘17 December ‘17Total loan portfolio of NBFIs (net) 19.26 19.69 20.14 20.85 21.78Total loan portfolio of NBFIs (gross) 20.89* 21.46 21.92 22.82 24.21

Source: Bank of Albania.* The change in value compared to the 2016 report is a result of accurate reporting by the entities

The major part of the NBFIs loan portfolio consists of credit and microcredit institutions (69.8%), followed by the portfolio of leasing institutions (27.1%) and the portfolio of factoring institutions (3.1%). The loan portfolio for these institutions accounts for 4.1% of the banking system’s portfolio.

Table 25 Gross portfolio by activity, December 2016- December 2017Financial activity Total (all bln) December ‘16 Total (all bln) December ‘17Lending 13.46 15.55Financial leasing 6.10 6.56Microcredit 0.63 1.35Factoring 0.69 0.74Gross Portfolio 20.89 24.21


At the end of 2017, the activities of lending and financial leasing institutions remain business-oriented, by about 78.8% and 83.9%, respectively. Meanwhile, the factoring portfolio is entirely carried out for business purposes, oriented towards the "other" sectors (57.20%).

20 Albanian Government or funding from related parties.

59 Bank of Albania


The most financed sectors are "trade, repair of motor vehicles and household goods" (25.6%), "other" (22.4%) and "agriculture, hunting and silviculture" (19.3%). Meanwhile, for the financial leasing activity, in addition to the "trade, repair of motor vehicles and household goods" and "other" sectors, which account for 17.3% and 16.8% of the activity, the other most funded sector is "real estate, renting, etc. ", which accounts about 16.4% of this activity.

The total NBFIs portfolio is oriented toward financing in local currency (67%) and mid-term maturity (72.5%).

With regard to the object of financing, the leasing portfolio is dominated by financing for personal transport vehicles (55.1%) and work transport vehicles (26.1%). Compared to December 2016, the portfolio reached ALL 453.66 million, driven by transport vehicles for personal and work purposes.

Table 26 Financial leasing portfolio, by funded institution, December 2017Leasing New Equipment Used Equipment Total December'17 (ALL mln)Personal transportation vehicles 2,375.92 1,241.20 3,617.12Work transportation vehicles 1,122.03 594.46 1,716.49Work equipment/ production lines 675.05 248.56 923.61Real estate 36.32 94.25 130.56Other 81.02 95.46 176.48Total 4,290.33 2,273.92 6,564.26


The balance of factoring activity amounted at ALL 744.56 million at the end of 2017, up by ALL 54.88 million from the previous year.

The annual circulation of the factoring portfolio is realized in the domestic market at 98.9% and for guaranteed financing (98%).

Table 27 Annual factoring volume and balance in December 2017Factoring December 2017 Circulation Outstanding portfolio No. of invoices Value (ALL mln) Value (ALL mln) Total 1,292 3,117.79 744.56


At the end of 2017, the ratio of non-performing loans for non-bank financial institutions was largely unchanged from the previous year, though there was fluctuation (increase by about 0.1 pp).This result was influenced by the higher increase in non-performing loans by 16.6% (or ALL 412.28 million), despite the growth of the gross loan portfolio, which grew by about 15.9%, in this period.

Table 28 Indicators of loan portfolio quality for December 2017 (in per cent) December ‘16 March '17 June ‘17 September ‘17 December ‘17Non-performing loans/outstanding loans (gross) 11.92 12.63 12.44 12.54 11.98

Non-performing loans/outstanding loans (net) 5.65 6.01 5.91 5.55 3.45


60Bank of Albania


Regarding the payment services activity provided by non-bank financial institutions, in 2017 incoming transfers and outgoing payments (in terms of both volume and value) have increased. Their activity is as follows:

Table 29 Volume of annual transfers and payments 201721 2017 No Volume (ALL mln) Outgoing transfers 672,716 18,008.05 Incoming transfers 3,210,963 112,914.47 Outgoing payments 1,841,612 5,029.44


6.5.1.4 Financial Result

During 2017, non-bank financial institutions generated a positive result of ALL 1.16 billion, down by about ALL 51.92 million (or 4.3%) compared to the previous year. Credit institutions had the main contribution to this slight decrease. Meanwhile, the result of NFBIs accounts for 5.3% of the banking system's result.

6.5.2 FINANCIAL UNIONS AND SAVINGS AND LOAN ASSOCIATIONS

6.5.2.1 Structure of unions and SLAs' network

Following the consolidation of savings and loan associations (SLAs) and their unions, at the end of 2017, the structure of savings and loan associations and unions consists of 13 SLAs and 1 Union, as below:

Jehona Union, after the approval from the Bank of Albania, has been transformed into the "UniFin" Savings and Loan Association. This SLA was included in the deposit insurance scheme in June 2017; in total there are six SLAs in this scheme.

Meanwhile, the Supervision Department of the Bank of Albania continues to monitor the SLAs, which are licensed but are not yet members in the deposit insurance scheme, in order to undertake relevant measures vis-à-vis them , according to legal definitions.

6.5.2.2 SLAs and unions assets

At the end of 2017, total assets of Saving and Loan Associations (SLAs), amounted to ALL 8.20 billion, up by ALL 1.63 billion from the previous year. The total SLAs assets account for only 0.57% of total assets of the banking system. With regard to the two Unions, Jehona Union completed its liquidation

21 The data do not include the transactions of Albanian Post.

61 Bank of Albania


process in July 2017, while the Albanian Savings and Loan Union continues to report the financial data.

Table 30. Unions and SLAs assets, December 2016-December 2017, in ALL billion December 2016 June 2017 December 2017Unions 2.08 1.89 1.28*SLAs 6.57 7.45 8.20

Source: Bank of Albania.*Consists only of data from SLAs

6.5.2.3 Outstanding loan portfolio of unions and SLAs

In December 2017, the SLAs gross loan portfolio amounted to ALL 6.31 billion, increasing by ALL 786.3 million compared to the previous year. The SLAs gross loan portfolio accounts for only 1.05% of the banking system.

Table 31. Gross and Net Loan portfolio, total for Unions and SLAs, December 2016- December 2017 (in ALL billion) December ‘16 December ‘17Gross loans Unions 0.25 0.08*SLAs 5.52 6.31Net loansUnions 0.20 0.00SLAs 5.26 6.06

Source: Bank of Albania.*Consists only of data from SLAs

In December 2017, the ratio of non-performing loans for SLAs was at 4.60%, improving by about 0.87 pp compared to the previous year. This improvement comes as a result of the growth of the gross portfolio (14.2%) and the decline of non-performing loans (3.9%).

6.5.2.4 Financial result of unions and SLAs network

During 2017, savings and loan associations experienced a positive financial result amounting to ALL 78 million. Compared to the previous year, this result increased by about ALL 48.56 million.

6.6 CREDIT REGISTRY

December 2017 marks 10 year since the Credit Registry System started to operate. During this year, the main challenge was the start of the project "Improving the Credit Registry" after evaluating and analysing proposals and requests from representatives of reporting entities. The new system envisages an improved technical infrastructure, which will positively affect data processing, process automation, and the reduction of operational risk. Within the promotion

62Bank of Albania


of transparency goal, the direct access by individuals and electronically providing the Borrower Report will be the main innovation introduced by the new system.

The inclusion of new reporting entities in the Credit Registry System, aiming to reduce the information asymmetry among entities operating in the banking and financial system, continued to have due attention during this year. The Credit Registry includes three new reporting entities, totalling now 42 entities, categorized as below:

Table 32 Entities that report to the Credit Registry

BANKS NON- BANK FINANCIAL INSTITUTIONS UNION AND SAVING AND LOAN ASSOCIATION

No. No. No.1 RAIFFEISEN BANK SH.A. 1 FONDI BESA SH.A. 1 SLA UNIFIN

2 UNITED BANK OF ALBANIA SH.A. 2FIRST ALBANIAN FINANCIAL

DEVELOPMENT COMPANY – FAF SH.A.

2 SLA ALB-PROGRES

3 VENETO BANK 3 TRANZIT SHPK 3 SLA PARTNER PLUS4 NATIONAL COMMERCIAL BANK SH.A. 4 NOA SH.A. 4 SLA PETRELE5 TIRANA BANK SH.A. 5 AGRO & SOCIAL FUND SH.P.K. 5 SLA ALB CREDIT

6 INTERNATIONAL COMMERCIAL BANK SH.A. 6 CAPITAL INVEST SH.A. 6 SLA FED INVEST

7 INTESA SANPAOLO BANK ALBANIA SH.A. 7 AK-INVEST SH.A. 7 Albanian Savings and Loan Union8 PROCREDIT BANK SH.A. 8 IUTECREDIT ALBANIA SH.A.9 American Bank of Investments 9 AGRO PARTNER SHPK10 CREDIT BANK OF ALBANIA 10 MICRO CREDIT ALBANIA SH.A.

11 CREDINS BANK SH.A. 11 ALBANIAN FINANCIAL INSTITUTION SH.P.K.

12 SOCIETE GENERALE BANK ALBANIA SH.A. 12 KREDO FINANCE SHPK13 UNION BANK SH.A. 13 RAIFFEISEN LEASING SH.A.

14 NATIONAL BANK OF GREECE, ALBANIA SH.A. 14 LANDESLEASE SH.A.

15 ALPHA BANK – ALBANIA SH.A. 15 FINAL SH.A.16 FIRST INVESTMENT BANK, ALBANIA SH.A. 16 PORSCHE LEASING SH.P.K.

17 ALBANIA LEASING SHA

18 CRIMSON FINANCE FUND ALBANIA SH.P.K.

19 MOGO ALBANIA SHPK

In 2017, the volume of requests increased from legal persons and individuals for the Borrower's Report and requests from special units of the Bank of Albania for information processed by the Credit Registry in order to carry out the relevant activities.

In this regard, ensuring the accuracy and completeness of the data disseminated through this system, as well as their use in accordance with the regulatory framework and legislation in force for the protection and use of personal data, continues to be a key priority.

63 Bank of Albania


7 ANNEXES

2- SHARE OF BANKS IN THE BANKING SYSTEMDecember`17

BANKSTotal

balance sheet

Permanent resources

Shareholder’s equity

Outstanding loans

Non-performing

loans

Treasury bills Securities Total

deposits

(Indicators in %)Raiffeisen Bank 17.3 20.8 18.1 16.4 21.1 20.1 19.4 17.2 United Bank of Albania 0.6 0.7 0.9 0.7 0.4 - - 0.5 Veneto Bank 2.0 2.6 2.6 1.1 1.5 - 0.2 1.7 National Commercial Bank 27.9 24.2 26.1 21.6 13.9 32.3 36.0 27.3 Tirana Bank 5.1 5.9 6.6 4.4 9.0 6.9 2.9 5.1 International Commercial Bank 0.8 0.7 0.8 0.9 0.6 0.4 0.9 0.7 Intesa SanPaolo Bank Albania 10.6 10.5 12.1 8.1 5.5 20.3 12.6 11.0 Procredit Bank 2.4 2.7 2.6 4.0 2.6 2.2 0.1 2.1 American Bank of Investments 2.9 2.7 2.7 1.7 0.5 1.2 4.8 3.0 NBG Bank Albania 2.5 2.9 3.0 3.7 5.5 3.9 1.0 2.6 Alpha Bank Albania 5.2 5.3 4.7 5.5 4.1 0.0 4.1 5.3 First Investment Bank of Albania 1.4 1.3 1.6 1.7 1.5 1.0 1.7 1.5 Credit Bank of Albania 0.1 0.5 0.6 0.1 - 0.2 - 0.0 Credins Bank 12.5 11.9 9.4 18.3 25.6 10.0 6.4 12.9 Société Générale Albania Bank 5.6 5.0 5.7 8.6 5.5 - 5.4 5.9 Union Bank 3.2 2.2 2.5 3.2 2.8 1.6 4.4 3.3 Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

HEAD OF DEPARTMENTDENIZ DERALLA

DEPUTY HEADJONIDA KAÇANI

1- ORGANISATIONAL STRUCTURE OF THE SUPERVISION DEPARTMENT

RISK SUPERVISION DIVISIONERIS SHARXHI

INDIVIDUAL ENTITIES SUPERVISION DIVISION

MANJOLA MANÇE(DYRMISHI)

SUPERVISIONDEVELOPMENT DIVISION

ERMIRA TEPELENA

LARGE BANKSSUPERVISION UNIT

ILIR PUSTINAELDA DEMNERI

(2 PM+4)

MEDIUM BANKS SUPERVISION UNITMATILDA KRISTOARZANA HAXHIAJ

(2 PM+4)

SMALL BANKS AND NBFIS

SUPERVISION UNITVIVJAN JUPI

(1PM+3)

REGULATIONUNIT

IRINI KALLUCI(1+3)

LINCENSING UNITLINDITA SHEHI

(1+3)

METHODOLOGY UNITELVIS PONARI

(1+2)

CREDIT RISKSUPERVISION UNIT

GEROND ZIU(1+7)

MARKET RISKAND LIQUIDITY SUPERVISION

UNITTANDI HABILAJ

(1+3)

OPERATIONAL RISKSUPERVISION UNITALMA THIMO (VANI)

(1+3)

CREDIT REGISTRY UNIT

ANA DYLGJERI(1+2)

REPUTATIONAL RISKSUPERVISION UNIT

MIRJANA GOXHARAJ(1+2)

64Bank of Albania


3- A

SSET

S A

ND

LIA

BILIT

IES

ASSE

TS (i

n AL

L milli

on)

D

ESC

RIPT

ION

Mar

ch 2

016

June

201

6Se

ptem

er 2

016

Dec

embe

r 201

6D

ecem

ber 2

017

1 TO

TAL A

SSET

S 1

,327

,529

.96

1,3

29,5

07.7

3 1

,366

,263

.40

1,4

07,2

85.8

6 1

,445

,329

.85

11 T

REAS

URY

AN

D IN

TERB

ANK

TRAN

SAC

TIO

NS

430

,698

.22

421

,196

.23

452

,674

.09

462

,435

.31

482

,914

.34

111

Cas

h in

han

d 2

3,45

1.66

2

4,44

9.25

2

7,26

3.59

2

5,08

7.50

2

4,17

6.38

11

2 Tr

ansa

ctio

ns w

ith th

e ce

ntra

l ban

k 1

32,0

70.2

7 1

19,4

17.7

1 1

15,8

48.2

9 1

55,3

66.2

5 1

49,7

92.0

9 11

21 R

equi

red

rese

rve

at th

e ce

ntra

l ban

k 9

7,52

0.22

9

6,56

6.99

9

8,37

7.91

9

8,00

2.97

9

7,72

5.32

11

22 O

ther

34,

550.

06

22,

850.

72

17,

470.

39

57,

363.

28

52,

066.

77

113

Trea

sury

bills

and

oth

er e

ligib

le b

ills fo

r ref

inan

cing

with

the

cent

ral b

ank

67,

253.

43

69,

210.

73

65,

163.

78

68,

573.

14

64,

617.

63

1131

Tre

asur

y bi

lls 6

7,25

3.63

6

9,21

0.75

6

5,16

3.78

6

8,59

3.05

6

4,62

1.58

11

32 O

ther

bills

elig

ible

for r

efin

anci

ng -

- -

- -

1133

Res

erve

fund

s fo

r the

dep

reci

atio

n of

bills

elig

ible

for r

efin

anci

ng fr

om C

entra

l Ban

k (0

.20)

(0.0

2) -

(19.

90)

(3.9

4)11

4 Tr

ansa

ctio

ns w

ith b

ank,

cre

dit i

nstit

utio

ns a

nd o

ther

fina

ncia

l ins

titut

ions

207

,922

.85

208

,118

.54

244

,398

.42

213

,408

.41

244

,328

.25

1141

Cur

rent

acc

ount

s 4

6,20

1.43

5

0,58

9.64

6

1,68

8.86

6

0,83

1.35

6

0,79

4.76

11

42 D

epos

its w

ith b

anks

, cre

dit i

nstit

utio

ns a

nd o

ther

fina

ncia

linsti

tutio

ns 1

06,7

38.7

0 1

02,1

69.5

6 1

17,6

69.3

3 8

8,09

6.31

1

18,8

66.3

3 11

43 Lo

ans

52,

347.

01

53,

079.

84

63,

910.

42

62,

011.

84

63,

020.

16

1144

Oth

er 2

,645

.01

2,2

89.0

9 1

,138

.69

2,4

73.1

5 1

,700

.49

1145

Res

erve

fund

s fo

r cur

rent

s in

ban

ks, c

redi

t ins

itutio

ns a

nd o

ther

fina

ncia

l ins

titut

uion

s (9

.30)

(9.5

8) (8

.88)

(4.2

4) (5

3.49

)13

TRA

NSA

CTI

ON

S W

ITH

CU

STO

MER

S (G

ross

) 5

84,8

71.3

6 5

93,4

58.9

4 5

96,2

29.3

1 5

96,8

64.6

9 5

97,7

93.5

1 13

1 Lo

ans

to p

rivat

e se

ctor

and

hou

seho

lds

555

,806

.21

564

,966

.76

569

,866

.23

570

,621

.76

565

,692

.56

1311

Sho

rt-te

rm lo

ans

166

,023

.14

166

,340

.93

165

,914

.39

162

,079

.59

151

,141

.75

1312

Med

ium

-term

loan

s 1

07,6

01.1

9 1

10,9

07.4

5 1

15,6

77.5

5 1

20,4

04.7

3 1

08,7

83.7

2 13

13 Lo

ng-te

rm lo

ans

174

,689

.60

178

,884

.74

180

,627

.29

180

,850

.18

195

,873

.85

1314

Rea

l esta

te lo

ans

105

,568

.16

106

,932

.84

105

,802

.55

105

,368

.78

107

,387

.72

1315

Fin

ance

leas

e co

ntra

cts

1,9

24.1

2 1

,900

.81

1,8

44.4

4 1

,918

.49

2,5

05.5

3 13

2 Lo

ans

to p

ublic

adm

inist

ratio

n 1

,970

.84

1,8

30.0

4 1

,812

.84

1,7

81.0

0 2

,903

.61

1321

Cur

rent

acc

ount

s -

- -

- -

1322

Loan

s 1

,970

.84

1,8

30.0

4 1

,812

.84

1,7

81.0

0 2

,902

.52

1323

Oth

er a

ccou

nts

- -

- -

1.0

8 13

3 O

ther

cus

tom

er a

ccou

nts

27,

094.

32

26,

662.

14

24,

550.

25

24,

461.

93

29,

197.

34

14 S

ECU

RITI

ES T

RAN

SAC

TIO

NS

333

,239

.32

337

,158

.73

342

,756

.99

368

,362

.22

357

,087

.99

141

Fixe

d in

com

e se

curit

ies

329

,933

.92

333

,408

.31

339

,459

.21

356

,817

.01

353

,934

.96

1411

Res

iden

ts in

Lek

224

,231

.56

229

,628

.19

238

,138

.88

236

,944

.58

247

,773

.52

1412

Res

iden

ts in

fore

ign

curre

ncy

25,

116.

27

24,

796.

83

22,

582.

68

24,

933.

66

26,

109.

16

1413

Non

-resid

ents

in Le

k -

- -

- -

65 Bank of Albania


14 N

on-re

siden

ts in

fore

ign

curre

ncy

80,

586.

10

78,

983.

29

78,

737.

65

94,

938.

77

80,

052.

28

142

Varia

ble

inco

me

secu

ritie

s 3

,305

.39

3,7

50.4

2 3

,297

.78

3,5

67.0

9 3

,153

.03

1421

Res

iden

ts in

Lek

- -

- -

- 14

22 R

esid

ent i

n fo

reig

n cu

rrenc

y -

- -

- -

1423

Non

-resid

ent i

n Le

k -

- -

- -

1424

Non

-resid

ent i

n fo

reig

n cu

rrenc

y 3

,305

.39

3,7

50.4

2 3

,297

.78

3,5

67.0

9 3

,153

.03

143

Secu

ritie

s pu

rcha

sed

and

sold

und

er R

EPO

- -

- 7

,978

.12

- 14

4 Pa

id c

olla

tera

l -

- -

- -

145

Rece

ived

pre

miu

ms

- -

- -

- 14

6 Fi

nanc

ial D

eriv

ativ

es -

- -

- -

147

Quo

ta/i

nves

tmen

t fun

ds s

hare

s -

- -

- -

15 P

ROVI

SIO

NS

(78,

917.

93)

(79,

032.

71)

(83,

701.

89)

(79,

021.

86)

(58,

214.

87)

151

Loan

loss

pro

visio

ns (p

rinci

pal)

(76,

874.

34)

(77,

374.

14)

(82,

003.

65)

(76,

266.

06)

(56,

331.

52)

152

Loan

loss

pro

visio

ns (a

ccru

ed in

tere

st) (1

,181

.83)

(1,1

72.1

8) (1

,335

.92)

(1,0

87.9

4) (6

76.8

2)15

3 In

vestm

ent p

rovi

sions

(861

.76)

(486

.39)

(362

.33)

(1,6

67.8

6) (1

,206

.54)

16 O

THER

ASS

ETS

30,

207.

84

29,

778.

59

30,

617.

90

32,

115.

54

37,

569.

18

161

Oth

er a

sset

s 2

7,62

2.09

2

8,13

9.05

2

8,08

3.08

2

9,79

0.50

3

4,82

2.82

16

2 Ag

ent t

rans

actio

ns 1

.22

35.

35

32.

41

59.

17

61.

34

163

Inte

r-offi

ce a

ccou

nts

24.

77

0.0

8 1

37.5

0 0

.19

0.2

0 16

4 Su

spen

se, d

iffer

ence

and

pos

ition

acc

ount

s 2

,337

.72

1,3

79.5

6 2

,171

.29

2,0

49.4

6 2

,589

.89

1641

Susp

ense

acc

ount

s 2

,296

.17

1,3

18.1

3 2

,106

.92

1,8

88.4

9 2

,589

.36

1642

Pos

ition

acc

ount

s 4

1.55

6

1.42

6

4.37

1

60.9

7 0

.53

165

Valu

e ad

ded

tax

222

.04

224

.56

193

.63

216

.22

94.

93

17 F

IXED

ASS

ETS

17,

118.

96

17,

024.

12

17,

439.

74

17,

591.

66

19,

829.

88

171I

nves

tmen

t in

parti

cipa

tion

equi

ty 1

67.4

4 1

77.6

0 1

77.0

2 1

61.7

7 5

0.53

17

2 Af

filia

tes

623

.60

621

.88

621

.88

746

.66

855

.41

173

Fixe

d as

sets

(net

) 1

6,32

7.91

1

6,22

4.65

1

6,64

0.84

1

6,68

3.22

1

8,92

3.94

18

AC

CRU

ED IN

TERE

STS

10,

312.

18

9,9

23.8

2 1

0,24

7.26

8

,938

.30

8,3

49.8

1 18

1 Ac

crue

d in

tere

sts (C

lass

1)

872

.43

500

.52

634

.36

596

.86

859

.26

182

Accr

ued

inte

rests

(Cla

ss 2

) 4

,190

.00

3,9

95.9

6 4

,107

.11

3,5

02.7

8 3

,082

.05

183

Accr

ued

inte

rests

(Cla

ss 3

) 5

,249

.75

5,4

27.3

4 5

,505

.79

4,8

38.6

6 4

,408

.50

A To

tal a

sset

s in

fore

ign

curre

ncy

763

,759

.16

765

,895

.23

797

,086

.09

816

,216

.13

818

,444

.68

B To

tal a

sset

s of

non

-resid

ents

344

,817

.53

344

,886

.99

387

,281

.52

377

,067

.16

381

,253

.93

Net

out

stand

ing

loan

s 5

06,8

15.2

0 5

14,9

12.6

2 5

12,8

89.7

5 5

19,5

10.6

9 5

40,7

85.1

8 In

tere

st ne

t out

stand

ing

loan

s 5

11,0

05.2

0 5

18,9

08.5

9 5

16,9

96.8

5 5

23,0

13.4

7 5

43,8

67.2

2 In

tere

st ou

tstan

ding

loan

s (g

ross

+acc

rued

inte

rest)

589

,061

.37

597

,454

.91

600

,336

.42

600

,367

.47

600

,875

.56

66Bank of Albania


LIABI

LITIE

S (in

ALL

milli

on)

D

ESC

RIPT

ION

Mar

ch 2

016

June

201

6Se

ptem

ber 2

016

Dec

embe

r 20

16D

ecem

ber 2

017

1 TO

TAL L

IABI

LITIE

S 1

,327

,529

.96

1,3

29,5

07.7

3 1

,366

,263

.40

1,4

07,2

85.8

6 1

,445

,329

.85

11 T

REAS

URY

AN

D IN

TERB

ANK

TRAN

SAC

TIO

NS

45,

841.

28

58,

873.

77

61,

474.

91

62,

407.

87

76,

701.

37

111

Cen

tral B

ank

3,7

91.8

7 6

74.9

7 5

,093

.18

356

.22

1,4

72.1

8 11

2 Tr

easu

ry b

ills a

nd o

ther

elig

ible

bills

8,6

24.7

7 2

3,12

4.21

2

6,00

2.86

2

9,92

7.42

3

6,91

7.87

11

3 C

urre

nt a

ccou

nts

5,4

07.2

3 5

,434

.32

6,5

92.7

8 5

,337

.38

8,2

15.7

3 11

4 D

epos

its fr

om b

anks

and

oth

er fi

nanc

ial i

nstit

utio

ns 1

6,16

7.65

1

8,94

4.24

1

5,94

5.16

2

0,55

3.26

2

1,23

7.05

11

5 Lo

ans

10,

462.

99

9,2

98.4

5 6

,463

.34

6,1

75.8

6 8

,058

.18

116

Oth

er 1

,386

.75

1,3

97.5

8 1

,377

.59

57.

74

800

.36

12 T

RAN

SAC

TIO

NS

WIT

HC

UST

OM

ERS

1,1

04,0

81.2

9 1

,094

,201

.23

1,1

22,2

96.7

1 1

,153

,665

.07

1,1

62,2

25.9

4 12

1 Pu

blic

adm

inist

ratio

n 1

7,02

9.15

1

5,36

9.37

1

3,61

1.14

1

2,20

2.13

1

0,27

5.23

12

11 C

urre

nt a

ccou

nts

9,6

06.6

1 8

,637

.34

9,5

58.9

3 1

0,53

0.14

8

,325

.52

1212

Dem

and

depo

sits

6.0

1 6

.02

6.0

3 6

.03

6.0

6 12

13 T

ime

depo

sits

6,6

34.4

4 5

,983

.89

3,3

55.8

4 1

,030

.39

1,4

19.2

0 12

14 Lo

ans

782

.09

742

.12

690

.34

635

.56

524

.44

1215

Oth

er -

- -

- -

122

Priv

ate

sect

or 1

,087

,052

.14

1,0

78,8

31.8

6 1

,108

,685

.56

1,1

41,4

62.9

3 1

,151

,950

.71

1221

Cur

rent

acc

ount

s 2

97,3

19.3

8 3

05,3

01.1

3 3

36,0

19.9

6 3

63,5

83.8

5 3

74,8

88.6

8 12

22 D

eman

d de

posit

s 7

2,33

7.56

7

6,34

7.21

8

4,76

4.29

9

1,25

0.35

1

06,5

61.9

8 12

23 T

ime

depo

sits

699

,700

.64

678

,721

.38

668

,781

.11

664

,256

.01

650

,308

.22

1224

Oth

er 1

7,69

4.56

1

8,46

2.13

1

9,12

0.20

2

2,37

2.72

2

0,19

1.82

12

25 C

ertif

icat

e of

dep

osits

- -

- -

- 13

SEC

URI

TIES

TRA

NSA

CTI

ON

S 6

83.6

4 6

82.2

7 4

,848

.76

6,2

05.8

1 8

,429

.66

131

Deb

t rep

rese

nted

by

secu

ritie

s -

- -

- -

132

Secu

ritie

s pu

rcha

sed

and

sold

und

er R

EPO

683

.64

682

.27

4,8

48.7

6 6

,205

.81

8,4

29.6

6 13

3 C

olla

tera

l on

secu

ritie

s tra

nsac

tions

- -

- -

- 13

4 Pr

emiu

ms

on fi

nanc

ial i

nstru

men

ts -

- -

- -

135

Fina

ncia

l der

ivat

ives

- -

- -

- 13

6 Q

uota

/sha

res

of in

vestm

ent f

unds

- -

- -

-

67 Bank of Albania


14 O

THER

LIAB

ILITI

ES 1

4,52

8.26

1

0,47

8.04

9

,438

.65

13,

180.

41

15,

026.

70

141

Oth

er li

abili

ties

6,6

05.7

8 4

,456

.63

4,6

47.4

4 6

,113

.23

5,5

20.1

4 14

2 Ag

ent t

rans

actio

ns 4

,645

.58

2,6

09.8

3 1

,952

.73

2,9

85.4

4 3

,324

.77

143

Inte

r-offi

ce a

ccou

nt 6

.83

7.3

6 6

.12

(1.9

5) (0

.33)

144

Diff

eren

ce a

nd p

ositi

on p

endi

ng a

ccou

nts

3,2

56.9

4 3

,387

.96

2,8

19.4

9 4

,029

.60

6,1

05.8

4 14

41 D

iffer

ence

acc

ount

s 3

,268

.51

3,3

77.2

0 2

,816

.89

3,9

72.2

5 5

,902

.28

1442

Pos

ition

acc

ount

s (1

1.56

) 1

0.77

2

.59

57.

35

203

.56

145

Valu

e ad

ded

tax

= (fo

rm.2

1) 4

6 1

3.14

1

6.27

1

2.88

5

4.08

7

6.28

15

PER

MAN

ENT

RESO

URC

ES 1

56,4

87.4

7 1

59,0

29.8

5 1

63,5

64.6

7 1

67,3

77.4

1 1

79,0

79.1

8 15

1 G

rant

s an

d pu

blic

fina

ncin

g 1

5.52

1

5.67

1

5.58

1

6.27

-

152

Spec

ific

prov

ision

s 9

,499

.64

9,0

72.5

7 8

,041

.25

8,0

80.3

0 1

0,00

6.17

15

21 P

rovi

sions

for r

isk a

nd e

xpen

ses

8,4

61.5

3 8

,047

.32

7,0

12.6

1 7

,014

.87

8,4

13.6

3 15

22 S

peci

fic p

rovi

sions

1,0

38.1

0 1

,025

.25

1,0

28.6

3 1

,065

.43

1,5

92.5

4 15

3 Su

bord

inat

ed d

ebt

22,

579.

60

22,

615.

67

23,

000.

65

22,

397.

79

22,

120.

01

154

Shar

ehol

ders

’ equ

ity 1

24,3

92.7

1 1

27,3

25.9

3 1

32,5

07.1

9 1

36,8

83.0

6 1

46,9

53.0

0 15

41 P

aid-

in c

apita

l 1

18,3

88.1

1 1

18,5

25.9

1 1

22,8

07.8

3 1

23,4

16.1

5 1

28,7

13.8

1 15

42 S

hare

pre

miu

ms

5,7

36.5

0 5

,820

.26

5,8

89.2

7 6

,259

.07

6,4

79.8

1 15

43 R

eser

ves

12,

040.

27

12,

028.

90

12,

275.

40

12,

289.

24

12,

918.

51

1544

Rev

alua

tion

diffe

renc

e 4

,810

.24

4,3

74.1

0 4

,148

.40

4,7

38.5

1 (2

,255

.46)

1545

Ret

aine

d ea

rnin

gs (l

oss

(18,

012.

58)

(18,

492.

18)

(19,

096.

39)

(19,

090.

05)

(20,

977.

48)

1546

Cur

rent

yea

r pro

fit (l

oss)

1,4

30.1

8 5

,068

.94

6,4

82.6

8 9

,270

.14

22,

073.

82

16 A

CC

RUED

INTE

REST

S 5

,908

.02

6,2

42.5

7 4

,639

.70

4,4

49.2

8 3

,867

.00

161

Accr

ued

inte

rests

(Cla

ss 1

) 1

04.4

2 8

3.91

9

1.36

4

5.80

5

9.47

16

2 Ac

crue

d in

tere

sts (C

lass

2)

5,3

48.8

4 5

,717

.37

4,3

22.2

1 4

,088

.06

3,4

53.4

2

163

Accr

ued

inte

rests

(Cla

ss 3

) = (f

orm

. 21)

339

+ 3

429

0.1

9 0

.13

13.

20

17.

67

20.

58

164

Accr

ued

inte

rests

(Cla

ss 5

) 4

54.5

7 4

41.1

5 2

12.9

3 2

97.7

5 3

33.5

2 A

Tota

l lia

biliti

es in

FX

723

,840

.05

719

,747

.13

749

,225

.99

768

,174

.88

784

,095

.42

B To

tal l

iabi

lities

of n

on-re

siden

ts 8

0,45

4.15

8

1,22

3.89

8

1,77

3.93

8

4,31

7.78

8

7,50

1.57

68Bank of Albania


4- C

ORE

FIN

AN

CIA

L IN

DIC

ATO

RSin

%, u

nles

s ot

herw

ise s

tate

d)

June

201

3D

ecem

ber

2013

June

201

4D

ecem

ber

2014

June

201

5D

ecem

ber

2015

June

201

6D

ecem

ber

2016

June

201

7D

ecem

ber

2017

Indi

cato

rs

Base

d on

cap

ital

Regu

lato

ry c

apita

l to

risk-w

eigh

ted

asse

ts 1

7.00

1

7.96

1

7.52

1

6.84

1

5.98

1

5.85

1

5.79

1

5.71

16

.33

16.

60

Tier

1 c

apita

l to

risk-w

eigh

ted

asse

ts 1

5.36

1

4.84

1

4.50

1

3.79

1

3.64

1

3.45

1

3.71

1

3.81

1

4.66

1

5.13

Tier

1 c

apita

l to

tota

l ass

ets

7.9

4 7

.73

7.4

9 7

.39

8.2

5 8

.34

8.8

1 8

.75

8.5

4 9

.03

Regu

lato

ry c

apita

l to

tota

l ass

ets

8.7

9 9

.33

9.0

4 9

.02

9.6

7 9

.75

10.

15

9.9

5 9

.86

9.9

0

Shar

ehol

ders

’ equ

ity to

tota

l ass

ets

8.4

9 8

.37

8.2

9 8

.58

9.0

9 9

.53

9.5

8 9

.73

9.8

9 1

0.17

Non

-per

form

ing

loan

s ne

t of p

rovi

sions

to T

ier 1

cap

ital

62.

46

48.

54

48.

97

46.

71

36.

12

28.

38

2

6.25

2

0.79

1

7.26

Non

-per

form

ing

loan

s ne

t of p

rovi

sions

to re

gula

tory

cap

ital

56.

43

40.

22

40.

53

38.

25

30.

82

24.

27

30.

17

23.

08

18.

65

15.

72

Non

-per

form

ing

loan

s ne

t of p

rovi

sions

to s

hare

hold

ers’

capi

tal

58.

41

44.

82

44.

20

40.

22

32.

82

24.

84

31.

98

23.

62

18.

59

15.

31

Retu

rn o

n eq

uity

2.9

3 6

.43

10.

38

10.

53

14.

20

13.

16

8.0

2 7

.15

16.

72

15.

71

Ope

n fo

reig

n cu

rrenc

y po

sitio

n to

regu

lato

ry T

ier 1

cap

ital

4.4

7 4

.92

5.8

9 1

0.37

8

.47

8.9

5 9

.70

8.0

0 6

.20

7.3

4

Ope

n fo

reig

n cu

rrenc

y po

sitio

n to

regu

lato

ry c

apita

l 4

.04

4.0

8 4

.88

8.4

9 7

.23

7.6

6 8

.44

7.0

3 5

.31

6.6

4

Ope

n fo

reig

n cu

rrenc

y po

sitio

n to

sha

reho

lder

s’ eq

uity

4.1

8 4

.54

5.3

2 8

.93

7.7

0 7

.84

8.8

7 7

.20

5.5

4 6

.51

Liqui

d as

sets

to to

tal a

sset

s 2

7.36

2

7.64

3

2.70

3

1.94

3

2.64

3

2.26

3

0.99

3

1.29

3

1.14

3

0.22

Liqui

d as

sets

to s

hort-

term

liab

ilitie

s 3

3.77

3

4.71

4

1.42

4

0.36

4

2.02

4

1.61

3

9.80

4

0.57

4

1.10

4

0.79

Retu

rn o

n as

sets

0.2

5 0

.54

0.8

8 0

.89

1.2

7 1

.20

0.7

6 0

.69

1.6

4 1

.56

Non

-per

form

ing

loan

s to

tota

l loa

ns 2

4.16

2

3.45

2

4.07

2

2.75

2

0.94

1

8.17

1

9.96

1

8.27

1

5.58

1

3.23

Net

inte

rest

inco

me

to g

ross

inco

me

131

.15

112

.60

105

.96

113

.09

108

.92

108

.54

119

.10

119

.79

89.

46

86.

66

Ope

ratin

g ex

pens

es to

gro

ss in

com

87.

51

74.

69

65.

97

68.

43

61.

18

63.

20

70.

63

74.

04

55.

82

57.

02

Sou

rce:

Ban

k of

Alb

ania

.

69 Bank of Albania


5- BANKS’ SHAREHOLDERS

No. Bank Shareholders Equity sharein % Ownership Capital

origin Home country

1. RAIFFEISEN BANK Raiffeisen SEE Region Holding GmbH 100 Private Foreign Austria

2. NATIONAL COMMERCIAL BANK Çalik Finansal Hizmetler A.S. 100 Private Foreign Turkey

3 UNITED BANK OF ALBANIA

Banka Islamike e Zhvillimit (IDB) 86.70 Private Foreign Saudi Arabia

Ithmaar Bank BSC 4.63 Private Foreign Kingdom ofBahrain

Dallah Albaraka Holding 2.32 Private Foreign Saudi ArabiaBusiness Fokus SDN BHD 1.47 Private Foreign Malaysia

15 individuals 4.30 Private Foreign Saudi ArabiaSaudi Brothers Commerce Co. 0.58 Private Foreign Saudi Arabia

4 INTESA SANPAOLO BANK ALBANIA Intesa Sanpaolo S.p.A 100.00 Private Foreign Italy

5 TIRANA BANKPiraeus Bank SA 98.83 Private Foreign Greece

1 Individual 1.17 Private Foreign Greece6 NBG BANK ALBANIA National Bank of Greece 100.00 Private Foreign Greece7 ALPHA BANK ALBANIA Alpha Bank 100.00 Private Foreign Greece8 VENETO BANK Intesa Sanpaolo S.p.A. 100.00 Private Foreign Italy9 PROCREDIT BANK ProCredit Holding AG & CO, KgaA 100.00 Private Foreign Germany

10 INTERNATIONAL COMMERCIAL BANK Financial Group ICB Holding 100.00 Private Foreign Swizerland

11 AMERICAN BANK OF INVESTMENTS TRANZIT sh.p.k 100.00 Private Domestic Albania

12 CREDIT BANK OF ALBANIA

z. Fauzi Al-Karafi 33.33 Private Foreign Kuwaitz. Marzouq N.M.A. Al. Kharafi 7.3 Private Foreign Kuwait

z. Bader N.M.A Al. Kharafi 7.3 Private Foreign Kuwaitz. Faisal N.M.A Al. Kharafi 7.3 Private Foreign Kuwait

11 individuals 44.74 Private Foreign Kuwait

13 CREDINS BANK

B.F.S.E. Holding B.V. 14.63 Private Foreign Netherlands

SIFEM AG 2.09 Public- Private Foreign Swizerland

Albanian Savings and Credit Union 2.77 Private Domestic AlbaniaEDRO shpk 0.96 Private Domestic Albania

A.F.C. 2.16 Private Domestic AlbaniaAK - INVEST 0.96 Private Domestic AlbaniaPrima sh.p.k. 3.22 Private Domestic Albania

Renis Tërshana 24.54 Private Domestic AlbaniaAleksandër Pilo 16.85 Private Domestic Albania35 individuals 31.82 Private Domestic Albania

14 SOCIETE GENERALE ALBANIA BANK

SOCIETE GENERALE 88.89 Private Foreign France7 individuals 11.11 Private Domestic Albania

15 UNION BANK

European Bank for Reconstruction andDevelopment (EBRD) 10.12 Private Foreign England

Unioni Financiar i Tiranës 86.34 Private Domestic Albania

2 individuals 3.54 Private Domestic Albania

16 FIRST INVESTMENT BANK ALBANIA First Investment Bank 100.00 Private Foreign Bulgaria


70Bank of Albania


6- D

ATA

ON

SH

ARE

HO

LDER

S /

PA

RTN

ERS

OF

NO

N-B

AN

K FI

NA

NC

IAL

INST

ITU

TIO

NS

No.

N

on-b

ank

finan

cial

insti

tutio

nPa

rtner

s/Sh

areh

olde

rsPa

rtici

patio

n in

capi

tal i

n %

Ow

ners

Orig

in o

fca

pita

lC

ount

ry o

for

igin

1U

NIO

N F

INAN

CIA

R TI

RAN

Ë SH

.A.

Edm

ond

Leka

35

Priv

ate

Dom

estic

Alba

nia

Nik

o Le

ka

35Pr

ivat

eD

omes

ticAl

bani

aVa

ruzh

an P

irani

an

10Pr

ivat

eD

omes

ticAl

bani

aG

jerg

j Mish

a 10

Priv

ate

Dom

estic

Alba

nia

Edua

rd S

him

a 10

Priv

ate

Dom

estic

Alba

nia

2PO

STA

SHQ

IPTA

RE S

H.A

.M

inist

ry o

f Eco

nom

y, T

rade

and

Ener

gy10

0Pu

blic

Dom

estic

Alba

nia

3AK

- IN

VEST

SH

.A.

Muh

arre

m K

okon

a 35

Priv

ate

Dom

estic

Alba

nia

Ilir A

dili

65Pr

ivat

eD

omes

ticAl

bani

a

4N

OA

SH.A

.N

OA

Hol

ding

N.V

.10

0% m

inus

1

shar

ePr

ivat

eFo

reig

nN

ethe

rland

s

NO

A C

oope

ratie

f U.A

.1

shar

ePr

ivat

eFo

reig

nN

ethe

rland

s

5FO

ND

I BES

A SH

.A.

Alba

nian

Bes

a C

apita

l Fou

ndat

ion

75.3

7%Pr

ivat

eD

omes

ticAl

bani

aBa

jram

Muç

aj

12.0

0%Pr

ivat

eD

omes

ticAl

bani

a53

indi

vidu

als

12.6

3%Pr

ivat

eD

omes

ticAl

bani

a

6FI

NAL

SH

.A.

Adria

n Ko

ni11

.45

Priv

ate

Dom

estic

Alba

nia

Ali V

ishaj

8

Priv

ate

Dom

estic

Alba

nia

Balfi

n sh

.p.k

40.4

3Pr

ivat

eD

omes

ticAl

bani

aRI

VER

STYX

X C

APIT

AL s

h.a.

40.1

2Pr

ivat

eFo

reig

nBu

lgar

ia7

SHO

QËR

IA E

PAR

Ë FI

NAN

CIA

RE E

ZH

VILL

IMIT

- FA

F SH

.A.

Min

istry

of F

inan

ce10

0Pu

blic

Dom

estic

Alba

nia

8RA

IFFE

ISEN

LEAS

ING

SH

.A.

Bank

a Ra

iffei

sen

sh.a

. 10

0Pr

ivat

eD

omes

ticAl

bani

a

9LA

ND

ESLE

ASE

SH.A

.Ba

nka

Uni

on s

h.a.

100

Priv

ate

Dom

estic

Alba

nia

10AG

RO &

SO

CIA

L FU

ND

SH

.P.K

. Fo

ndi B

esa

SH.A

.10

0Pr

ivat

eD

omes

ticAl

bani

a

11C

APIT

AL IN

VEST

SH

.A.

Gëz

im B

alish

a 34

.88

Priv

ate

Dom

estic

Alba

nia

Arbe

n Ze

neli

46.5

Priv

ate

Dom

estic

Alba

nia

4 in

divi

dual

s18

.62

Priv

ate

Dom

estic

Alba

nia

12TR

ANZI

T SH

.P.K

.N

ew C

entu

ry H

oldi

ngs

XI, L

.P.

35Pr

ivat

eFo

reig

nC

aym

an Is

lN

CH

Bal

kan

Fund

, L.P

. 35

Priv

ate

Fore

ign

Cay

man

Isl

Andi

Bal

lta30

Priv

ate

Dom

estic

Alba

nia

13AL

BAN

IAN

FAC

TORI

NG

SER

VIC

ES (A

FS) S

H.A

.

Qem

al D

isha

52.5

5Pr

ivat

eD

omes

ticAl

bani

aAn

di M

emi

16.7

8Pr

ivat

eD

omes

ticAl

bani

aSh

pati

Hox

ha17

.95

Priv

ate

Dom

estic

Alba

nia

Eris

Hox

ha

12.7

2Pr

ivat

eD

omes

ticAl

bani

a

71 Bank of Albania


M -

PAY

SH.P

.K.

Ludo

vic

Lave

ntur

e10

0Pr

ivat

eFo

reig

nFr

ance

15O

MN

IFAC

TOR

SH.P

.K.

FAB

-GRO

UP

shpk

.10

0Pr

ivat

eD

omes

ticAl

bani

a

16PL

ATIN

IUM

INVE

STM

ENT

SH.P

.K.

Andr

i Kas

neci

100

Priv

ate

Dom

estic

Alba

nia

17TI

RAN

A FA

CTO

RIN

G &

LEAS

E SH

.A.

Rola

ndi M

anus

hi40

Priv

ate

Dom

estic

Alba

nia

Ervi

n Al

iaj

40Pr

ivat

eD

omes

ticAl

bani

aEn

drit

Beqa

j 20

Priv

ate

Dom

estic

Alba

nia

18PO

RSC

HE

LEAS

ING

SH

.P.K

.Po

rsch

e Ba

nk A

ktien

gese

llsch

aft (

AG)

100

Priv

ate

Fore

ign

Austr

ia

19AL

BAN

IA LE

ASIN

G S

H.A

.

slam

ic C

orpo

r. fo

r Dev

elop

men

tof

Priv

ate

Sect

or (I

CD

)35

.64

Priv

ate

Fore

ign

Arab

ia S

audi

te

Nat

iona

l Com

mer

cial

Ban

k29

.98

Priv

ate

Dom

estic

Alba

nia

ND

BAL

KAN

DO

OEL

, Tet

ovo

21.8

8Pr

ivat

eFo

reig

nM

aced

onia

KOLO

N W

ORL

D IN

VEST

MEN

T C

O12

.5Pr

ivat

eFo

reig

nH

ong

Kong

20VO

DAF

ON

E M

-PES

A SH

.P.K

. Vo

dafo

ne A

lban

ia s

h.a.

100

Priv

ate

Dom

estic

Alba

nia

21IU

TEC

RED

IT A

LBAN

IA S

H.A

.AS

IUTE

CRE

DIT

EU

ROPE

100

Priv

ate

Fore

ign

Esto

ni22

AGRO

PAR

TNER

SH

.P.K

.Ar

jan

Lala

10

0Pr

ivat

eD

omes

ticAl

bani

a

23C

RIM

SON

FIN

ANC

E FU

ND

ALB

ANIA

SH

.P.K

.

ALBA

NIA

N –

AM

ERIC

AN D

EVEL

OPM

ENT

FOU

ND

ATIO

N (A

ADF)

25

Priv

ate

Fore

ign

USA

CRI

MSO

N C

APIT

AL C

ORP

25Pr

ivat

eFo

reig

nU

SAN

ORW

EGIA

N IN

VEST

MEN

T FU

ND

FO

R D

EVEL

OPI

NG

C

OU

NTR

IES

(NO

RFU

ND

)25

Publ

icFo

reig

nN

orw

ay

Mun

icip

ality

of T

irana

25Pu

blic

Dom

estic

Alba

nia

24EA

SYPA

Y SH

.P.K

.Lin

dita

Sho

mo

100

Priv

ate

Dom

estic

Alba

nia

25KA

STRA

TI S

H.P

.K.

Shef

qet K

astra

ti 10

0Pr

ivat

eD

omes

ticAl

bani

a

26PA

Y AN

D G

O S

H.P

.K.

Unt

ag C

omm

unity

lim

ited

100

Priv

ate

Fore

ign

Uni

ted

King

dom

27M

ICRO

CRE

DIT

ALB

ANIA

SH

.A.

Elda

Ibro

10

0Pr

ivat

eD

omes

ticAl

bani

a

28AL

BAN

IAN

FIN

ANC

IAL I

NST

ITU

TIO

N S

H.P

.K.

Arta

Gur

abar

dhi

20Pr

ivat

eD

omes

ticAl

bani

aBe

snik

Lesk

aj60

Priv

ate

Dom

estic

Alba

nia

Redj

an B

asha

20Pr

ivat

eD

omes

ticAl

bani

a29

RAEA

FIN

ANC

IAL S

ERVI

CES

SH

.P.K

.Re

liand

a Zh

eleg

u10

0Pr

ivat

eD

omes

ticAl

bani

a30

MO

GO

ALB

ANIA

SH

.A.

MO

GO

FIN

ANC

E S.

A., L

ukse

mbu

rg10

0Pr

ivat

eFo

reig

nLu

xem

bour

g 31

KRED

O F

INAN

CE

Aiga

rs K

esen

feld

s10

0Pr

ivat

eFo

reig

nLa

tvia

72Bank of Albania


7- BANK BRANCHES AND AGENCIES IN ALBANIA, BY REGIONNo. Region 2009 2010 2011 2012 2013 2014 2015 2016 20171 Tirana 210 210 212 218 213 203 204 207 1972 Durrës 51 54 54 55 53 51 51 49 493 Fier 45 44 44 43 42 42 41 39 384 Elbasan 29 30 30 30 30 28 29 29 275 Korça 38 38 37 37 38 35 35 34 316 Shkodra 24 25 25 25 24 22 22 22 227 Vlora 39 41 41 42 41 37 37 35 328 Lezha 26 25 26 25 24 23 23 23 229 Berat 21 20 21 21 22 20 20 20 2010 Gjirokastra 24 24 24 23 23 20 20 18 1711 Kukës 9 9 10 9 9 9 9 8 812 Dibra 8 9 10 10 10 9 9 9 9 T O T A L 524 529 534 538 529 499 500 493 472


8- E-BANKING PRODUCTS APPROVED BY THE BANK OFALBANIA Electronic products 2008 2009 2010 2011 2012 2013 2014 2015 2016* 2017Debit cards 3 4 1Credit cards 2 4 1ATM 2 2POS 2 1 2 1Internet banking 3 2 2Phone banking 1Mobile banking / SMS banking 1 1 1 1 1 2 2 1

Prepaid Card 1POS Virtual (e-Commerce) 2PayBox 1

Source: Bank of Albania.*There has been no licensing of these activities in 2016

9- E-BANKING PRODUCTS/SERVICES, BY COMMERCIAL BANKS, AS AT END OF 2017

BANKS ATM POSPOS Virtual

PayBoxInternet Banking

Phone banking

Mobile / SMS banking

Electronic card (debit,credit,

prepaid) RAIFFEISEN BANK √ √ √ √ √ √

NATIONAL COMMERCIAL BANK √ √ √ √ √

TIRANA BANK √ √ √ √ √

NBG ALBANIA BANK √ √

ALPHA BANK ALBANIA. √ √ √ √ √

PROCREDIT BANK √ √ √ √ √

FIRST INVESTMENT BANK ALBANIA √ √ √CREDINS BANK √ √ √ √ √UNION BANK √ √ √ √ √SOCIETE GENERALE BANKALBANIA

√ √ √ √

INTESA SANPAOLO BANKALBANIA √ √ √ √ √

VENETO BANK √ √ √ √INTERNATIONAL COMMERCIALBANK √ √ √AMERICAN BANK OFINVESTMENTS √ √ √

UNITED BANK OF ALBANIA √Source: Bank of Albania.

73 Bank of Albania


10- LIST OF ENTITITES LICENSED BY THE BANK OF ALBANIA BY YEARNo Entities 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

1 Banks and branches of foreign banks 17 17 16 16 16 16 16 16 16 16 16 16 16

2 Non-bank financial institutions 7 6 6 7 13 17 19 21 21 22 27 28 31

3 Foreign exchange bureaus 58 60 112 189 221 284 301 322 333 356 397 428 426

4 Savings and Loan Associations 131 125 130 133 135 126 126 126 121 113 111 13 13

5 Unions of savings and loan associations 2 2 2 2 2 2 2 2 2 2 2 2 1Source: Bank of Albania.

11- DATA ON BANKING SERVICES AS AT THE END OF 2017 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Number of banks 17 16 16 16 16 16 16 16 16 16 16 16

Number of employees 4,189 5,155 6,493 6,404 6,384 6,714 6,836 6,686 6,819 6,819 6,949 6,877

Number of branches/agencies in the country 294 399 511 524 529 534 538 529 499 500 493 472

Average number of employees per

- Bank 246 322 406 400 399 420 427 418 426 426 434 430

- Banking unit 14 13 13 12 12 13 13 13 14 14 14 15

Number of population (000)

2,982 2,958 2,936 2,919 2,907 2,902 2,899 2,896 2,893 2,886 2,876 2,870

Number of population per:

- Bank 175,412 184,875 183,500 182,438 181,688 181,375 181,188 181,000 180,813 180,375 179,750 179,375

- Banking unit 10,143 7,414 5,746 5,571 5,495 5,434 5,388 5,474 5,798 5,772 5,834 6,081

- Bank employee 712 574 452 456 455 432 424 433 424 423 414 417

Source: Bank of Albania and INSTAT*Population data after 2011 are calculated based on projection.

12- BANKS NETWORK AS AT THE END OF 2017

Nr. Banks No. of branches in Albania

No. of agencies

No. of branches abroad Total No. of agencies

1 Raiffeisen Bank 48 28 76

2 National Commercial Bank 64 3 1 68

3 United Bank of Albania 4 2 6

4 Veneto Bank 15 15

5 Tirana Bank 36 3 39

6 NBG Albania 26 1 277 International Commercial Bank 5 58 Alpha Bank - Albania 34 34

9 Intesa Sanpaolo Bank Albania 29 3 32

10 ProCredit Bank 9 6 15

11 Amerian Bank of Investments 12 7 19

12 Credit Bank of Albania 1 1 2

13 Credins Bank 47 11 58

14 Société Générale Bank Albania 38 38

15 Union Bank 16 14 30

16 First Investment Bank Albania 1 8 9

T O T A L 385 87 1 473Source: Bank of Albania.

74Bank of Albania


13- SUPERVISION REGULATIONS IN FORCE, AS AT 31 DECEMBER 2017

1- Regulation “On the bank’s investments in the equity of commercial companies” Approved by the Supervisory Council Decision No. 42, dated 06.06.2001

2- Guideline on “Certificates of deposits” Approved by the Supervisory Council Decision No. 79 dated 03.10.2001

3- “Manual on corrective actions to banks and branches of foreign banks in the Republic of Albania”, approved by the Supervisory Council Decision No.51,dated 26.06.2002.

4- Guideline “On reporting of foreign exchange operations”, approved by the Supervisory Council Decision No. 69, dated 30.07.2003.

5- Regulation “On supervision of electronic banking transactions”, approved by the Supervisory Council Decision No. 28, dated 30.03.2005

6- Regulation “On use of information and communication technology in entities licensed by the Bank of Albania”, approved by the Supervisory Council Decision No. 32, dated 03.05.2006

7- Regulation “On licensing, organization and supervision of foreign exchange bureaus”, approved by the Supervisory Council Decision No. 31 dated 06.06.2007 and amended by Decision No. 73 of 27.11.2007, decision no. 82, dated 14.12.2011, decision no. 31, dated 30.04.2014 and decision no. 48 dated 30.03.2016.

8- Regulation “On the management of risk in the activity of branches of foreign banks”, approved by the Supervisory Council Decision No. 57 of 15/10/2007 and amended by Decision No. 62 of 29/08/2008.

9- Unified Reporting System on Branches of Foreign Banks, approved by the Supervisory Council Decision No. 58 of 15.10.2007

10- Regulation “On electronic payment instruments”, approved by the Supervisory Council Decision No.11 of 06.02.2008 and amended by Decision no.03, dated 17.01.2013 and by Decision no. 122, dated 09.11.2016

11- Regulation “On transparency for banking and financial products and services” approved by the Supervisory Council Decision No. 59 of 29/08/2008 amended by Decision No. 14 of 09/03/2011 and decision no.25, dated 3.5.201

12- Regulation “On the minimum requirements for disclosure of information by banks and branches of foreign banks”, approved by the Supervisory Council Decision No. 60, dated 29.08.2008 and amended with the Decision No. 25, dated 10.04.2015

13- Document on “Reporting Methodology and content of financial reports” approved by the Supervisory Council Decision No. 95, dated 24.12. 2008

14- Document on “Licensing policy of banking entities”, approved by the Supervisory Council Decision No. 12, dated 25.02.2009

15- Regulation “On granting the license to banks and branches of foreign banks to

75 Bank of Albania


conduct banking business in the Republic of Albania” approved by the Supervisory Council Decision No. 14, dated 11.03.2009 and amended by Decision No. 33, dated 11.05.2011, Decision No. 28, dated 16.05.2012, Decision No. 55, dated 01.10.2014 and Decision No. 15, dated 03.02.2016

16- Regulation “On prevention of money laundering and financing of terrorism” approved by the Supervisory Council Decision No. 44,dated 10.06.2009 and amended by Decision No.55 dated 28.08.2013 and by decision no.22, dated 05.04.2017

17- Regulation “On reporting to the Bank of Albania according to the Unified Reporting System”, approved by Supervisory Council decision no. 45, dated 10.06.2009 and amended by decision no. 61, dated 06.08.2015, decision no.80 dated 06.07.2016 and by decision no.58 dated 03.10.2017

18- Regulation “On foreign exchange activity”, by Supervisory Council decision no. 70, dated 30.09.2009 and amended by decision no. 07, dated 28.01.2015.

19- Regulation “On liquidity risk management”, approved by the Supervisory Council Decision No. 71 of 14/10/2009 and amended by Decision No. 75 dated 26.10.2011 and the Decision No.28 of 27.03.2013

20- Regulation “On defining the decision-making level in the supervision of banking and financial activities”, approved by the Supervisory Council Decision No. 36, dated 26.05.2010 and amended by decision no. 54, dated 12.09.2012 and by decision no. 29, dated 07.06.2017.

21- Regulation “On the open foreign exchange positions risk management”, approved by the Supervisory Council Decision No. 48, dated 14.07.2010.

22- Regulation “On the content of information and functioning of Credit Registry at the Bank of Albania”, approved by the Supervisory Council Decision No. 67 dated 13.10.2010

23- Guideline “On the procedure for issuing a report on the borrower and reviewing data retained at the Credit Registry”, approved by the Supervisory Council Decision No. 68 dated 13.10.2010

24- Decision “On the approval Fees charged with regard to the use of information retained at the Credit Registry of the Bank of Albania”, approved by the Supervisory Council Decision No. 69, dated 13.10.2010

25- Manual “On conservatorship and liquidation”, approved by the Decision of the First Deputy Governor of the Bank of Albania dated 31.12.2010

26- Regulation “On operational risk management”, approved by the Supervisory Council Decision No. 03 dated 19.01.2011

27- Regulation “On authorized chartered auditors of banks and branches of foreign banks”, approved by the Supervisory Council Decision No. 42 dated15.06.2011

28- Regulation “On the management of credit risk from banks and branches of foreign banks” approved by the Supervisory Council Decision No. 62, dated 14.09.2011 and amended by decision no.27, dated 27.03.2013, decision no.22, dated 27.02.2014, decision no. 26, dated 01.04.2015 and by decision no. 50 dated 30.03.2016

76Bank of Albania


29- Regulation “On the establishment, licensing and functioning of the bridge bank” approved by the Supervisory Council Decision No. 27 dated 16.05.2012

30- Regulation “On core management principles of banks and branches of foreign banks and the criteria for approving their administrators”, approved by the Supervisory Council Decision No. 63, dated 14.11.2012 and amended by decision no. 73, dated 6.12.2017

31- Regulation “On the granting of license to non-bank financial institutions"”, approved by the Supervisory Council Decision No. 1, dated 17.01.2013 and amended by decison no. 47, dated 30.03.2016, by decision no.121, dated 09.11.2016 and by decision no. 47, dated 06.09.2017

32- Regulation “On risk management in the activity of non-bank financial institutions'”, by the Supervisory Council Decision No.2, dated 17.01.2013 and amended by decision no. 46, dated 06.09.2017

33- Guideline “On managing interest rate risk in the banking book”, approved by the Supervisory Council Decision No. 33, dated 30.04.2013

34- Regulation “On capital adequacy ratio”, approved by Supervisory Council Decision No. 48, dated 31.07.2013, amended by Decision No. 43, dated 30.07.2014, Decision No.70, dated 18.12.2014, Decision No. 49, dated 01.07.2015 and Decision No. 91, dated 02.12.2015 and Decision No. 49, dated 30.03.2016 and decision No.5, dated 01.02.2017

35- The reporting system for non-bank financial institutions, approved by the Supervisory Council Decision 65, dated 30.10.2013

36- The document “Supervision Policies”, approved by Supervisory Council Decision No. 09, dated 26.02.2014

37- Regulation “On managing risk arising from large exposure of banks”, approved by Supervisory Council Decision No. 10, dated 26.02.2014, amended by Decision No. 20, dated 04.03.2015 and Decision No. 50, dated 01.07.2015

38- Regulation “On regulatory capital”, approved by the Supervisory Council Decision No. 69, of 18.12.2014 and amended by the Decision No. 19, dated 04.03.2015

39- Document “On recognition of ECAIs”, approved by Order of the First Deputy Governor of the Bank of Albania. No. Prot./1883, dated 22.04.2015

40- Regulation “On consumer and mortgage loans to households”, approved by the Supervisory Council Decision No. 48, dated 01.07.2015.

41- Regulation “On the internal control system”, approved by the Supervisory Council Decision No. 67, dated 02.09.2015, and amended by decision no. 74, dated 06.12.2017.

42- Regulation “On minimum security requirements regarding premises where banking and financial activities are conducted and transportation of monetary values”, approved by Supervisory Council Decision No.67, dated 01.06.2016 and amended by the Decision No. 107, dated 05.10.2016.

77 Bank of Albania


43- Regulation “On licensing and exercising of the activity of savings and loan associations and their unions” approved by Supervisory Council Decision No. 104, dated 05.10.2016

44- Regulation “On management of risk in the activity of savings and loan associations and their unions” approved by Supervisory Council Decision No. 105, dated 05.10.2016

45- The reporting system of savings and loan associations and their unions, approved by the Supervisory Council Decision No. 106, dated 05.10.2016

46- Regulation “On consolidated supervision”, approved by Supervisory Council Decision No. 04, dated 01.02.2017

47- Guideline "On the internal capital adequacy assessment process", approved by Supervisory Council Decision No 26, dated 03.05.2017

48- Guideline “On recovery plans in banks”, approved by Supervisory Council Decision No.72, dated 06.12.2017 (entry into force on 05.01.2018)

78Bank of Albania


Documents

Bank of Albania · Adequacy Assessment Process (ICAAP) was one of the main highlights of supervision in 2017, regarding the approximation of supervisory practices with Basel principles